Answer:
d. One defect of the IRR method versus the NPV is that the IRR does not take proper account of differences in the sizes of projects.
CORRECT As the project yields over time can differ. This generates that projects with a lower IRR can achieve a higher NPV at lower rates.
There is a crossover point after which a projects NPV are equal and from there the one with higher IRR obtains better NPV
Explanation:
a. One defect of the IRR method versus the NPV is that the IRR does not take account of the time value of money.
FALSE both method consider time value of money
b. One defect of the IRR method versus the NPV is that the IRR does not take account of the cost of capital
FALSE The IRR can be compared against the cost of capital to indicate wether or not a project should be preferable
.c. One defect of the IRR method versus the NPV is that the IRR values a dollar received today the same as a dollar that will not be received until sometime in the future.
FALSE IRR considers the time value of money
e. One defect of the IRR method versus the NPV is that the IRR does not take account of cash flows over a project's full life.
FALSE it considers all the cash flows over the project's full life.
Complete Question:
Shown below is a trial balance for Novelty Toys, Inc., on December 31,after adjusting entries:
Novelty Toys, Inc.
Trial Balance December 31
Cash $7,750
Accounts Receivable $6,375
Office Equipment $11,250
Accumulated Depreciation $3,000
Accounts Payable $3,875
Capital Stock $11,250
Retained Earnings $0
Dividends $3,750
Fees Earned $22,750
Salaries Expense $8,000
Advertising Expense $1,625
Depreciation Expense <u>$2,125 </u> <u> </u>
$40,875 $40,875
The total debits in the After-Closing Trial Balance will equal:
Select one:
a. $25,375.
b. $29,125.
c. $40,875.
d. $18,125.
Answer:
$25,375
Explanation:
The After-Closing Trial Balance is prepared once the closing entries are posted. This results in closing of expense and income accounts for the year and the resulting balance taken forward to retained earnings. This means that After-Closing Trial Balance would contain only permanent general accounts which are balance sheet items. In the given scenario, the balance sheet debit balances are as under:
Cash $7,750
Accounts Receivable $6,375
Office Equipment <u>$11,250 </u>
Total Debit Balance <u>$25,375</u>
Hence the option A is correct.
Answer:
The lump sum payment = $23,585.49
Explanation:
The winning lottery is an example of an advanced annuity. <em>An advanced annuity is a series of cash flows that occurs for a certain number of years with the first cash flow occurring now.</em>
The first cash flow is represents one out of the five, so the balance is a four-year annuity.
So we can work out the present value of the annuity for the last four years as follows:
PV = (1 - (1+r)^(-n)/r ) × Annual cash flow
r = 3%=0.03, n = 4, Annual cash flow = 5000
PV = (1- ((1+0.03)^(-4))/0.03) × 5,000
= 3.7170 × 5,000
=$ 18,585.49
The lump sum payment = PV of the first payment + PV of the four year annuity
The lump sum payment = $5000 + $ 18,585.49
= $23,585.49
Answer:
The Hound Dog Bus Company should not expand
Explanation:
The decision to expand should be made if the incremental (marginal) cost to be incurred is less than the incremental revenue to be earned.
Incremental revenue = $60 (given)
Incremental cost = total cost - already incurred (non-incremental) cost
= 120 - 50 = $70.
Since the incremental revenue ($60) is less than the incremental cost ($70), the company should not expand.
