D. Adoption of a new method of index.

allocating non-traceable costs to A. Project A.

product lines. B.
C. Future deterioration of the general No change
purchasing power of the monetary Decrease
unit. No change
D. Treated as an immediate cash C. the capital budgeting evaluation
outflow that is recovered at the end techniques profitability index, net
of six years. present value, and internal rate of
D. Added back to net income because it return will provide a consistent
is not an outflow of cash. ranking of the projects.
D. Historical costs. D. If the net present value method is
C. Uncertainty. used, the profitability index is
B. Items 3 and 4 only. calculated to rank the projects. The
A. There is lower tax rate in year 5. lower the index, the better the
D. Equal to the marginal rate of return project.
on investment. C. Profitability index.
D. Statements 1 and 2 only. B. Above; decreasing
D. zero. B. Increase discount rate to 15%.
B. The length of time for payback using A. PI will increase with an increase in
cash flows plus the salvage value to cash inflows, a decrease in
recover the original investment investment cost, or a decrease in
D. Discounted cash flow. cash outflows.
A. The method of financing the project
under consideration.
D. Cost of capital
A. Equal to the amount of investment C. $92,000
D. The weighted-average cost of B. $150,000
capital. B. P2,425,000
C. Opportunity cost. B. P610,000
A. Results in understated estimates of A. P50,200
NPV. D. 22.0%
B. Can be used when there is no D. P23,022
constant rate of return required for each year B. Outflow of P6,500.
of the project B. $23,356
A. Risk-free rate. D. $40,000 increase
A. Proceeds from the sale of the asset to B. $77,100
be replaced. B. 10%
A. The discount rate increases. C. 13.8%
B. Internal rate of return C. P24,000
C. II and III. B. Yes, since the payback period is 3.55
A. If a project is found to be acceptable years or 71% of the useful life of the
under the NPV approach, it would project.
also be acceptable under the internal C. 1.9 years.
rate of return (IRR) approach. B. (P110,000)
D. That has the greater profitability A. $30,000
C. between 7 and 8 years
B. $114,154
A. $10,154
A. $119,550; yes
B. $21,511,000
B. Yes, due to NPV of P11,684
B. $1,050,000
B. $4,563,505
A. P5,501
A. P17,860
C. $12,306
B. 16.33%
B. 10%
B. 16%
D. $27,801
B. -$15.9 million.
B. $1,750,000
D. To proceed due to an estimated IRR
of more than 16%.
B.
Either
B
D. D
C. Proposals 2 and 3 because their total
net present values are the highest
among all possible proposal
combinations.
D. The ranking is the same.
C. P139,000
B. 20%
B. P5 million plus a cost overrun of
about P769,000
C. Recommend immediate review with
the project implementation team to
determine the cause of overrun and
the corrective actions to be taken.
C. P107,250
C. 5.11 years
A. Projects M & N.
B. P28,750
D. P36,250
B. 3.17 years
D. 15%
A. P23,747.50
C. P101,863.75
C. 1.02
D. a and b combined