Accounting 403 – Capital Budgeting
Name ____________________________________________
1. Capital budgeting is concerned with
a. Decisions affecting only capital-intensive Industries.
b. Analysis of short-range decisions
c. Analysis of long-range decisions
d. Scheduling of office personnel in office buildings
2. Which of the following factors should be considered when evaluating a proposed capital investment?
a. Amount of investment
c. Cost of capital
b. Annual returns
d. All of the above
3. In computing the amount of initial investment for decision-making, taxes would be relevant for all of the following,
except:
a. Avoidable repairs of old asset
b. Profit on sale of old asset replaced by a new one
c. Loss on write-off of other assets disposed because of new capital Investment
d. Increase in working capital required to support new capital investment
4. ABC Company is considering the sale of a machine with a book value of P 80,000 and 3 years remaining in its
useful life. Straight-line depredation of P 25,000 annually is available. The machine has a current market value of
P 100,000. What Is the cash flow from selling the machine if the tax rate is 40%?
a. P 25,000
c. P 92,000
b. P 80,000
d. P 100,000
5. Old equipment with a book value of P 15,000 will be replaced by new equipment with a purchase price of
P50,000, exclusive of freight charges of P 2,000. The market value of the old equipment is P 11,000. Repair
costs of P 2;000 can be avoided if the new equipment is acquired, Assume a tax rate of 35%. What is the initial
(net) investment of the project?
a. P 33,800
c. P 39,700
b. P 38,300
d. P 52,000
6. The most convenient way to handle proceeds from the disposal of an old asset is to
a. Treat it as a cash. flow
c. Offset the amount against the cash outlay
b. Treat it as a reduction in salvage value
d. Add to the Investment
7. To approximate annual cash inflow, depredation Is
a. Added back to net income because it is an inflow of cash
b. Subtracted from net income because it is an outflow of cash
c. Subtracted from net Income because it is an expense
d. Added back to net income because it is not an outflow of cash
8. Annual cash inflows from the capital projects are measured in terms of
a. Net income before depreciation and taxes
b. Net income after depredation and taxes
c. Net income before depredation and after taxes
d. Net income after depredation and before taxes
9. A project costing P180,000 will produce the following annual cash benefits and salvage value:
OLD Equipment
NEW Equipment
Revenue
P150,000
P180,000
Cash operating costs
70,000
60,000
Annual depredation
30,000
50,000
Income tax, 46%
What is the incremental annual cash income after taxes?
a. P 30,000
c. P 40,000
b. P 30,800
d. P 38,000
10. DEF Inc.'s depreciation deduction last year was P 50,000 and its tax rate was 30%. The company's tax savings
from the depredation tax shield for the year was
a. P 15,000
c. P 50,000
b. P 35,000
d. P 30,000
11. Which statement describes the relevance of depredation In calculating cash flows?
a. Depreciation Is relevant only when income taxes exist
b. Depredation is always relevant
c. Depredation is never relevant
d. Depreciation is relevant only with discounted cash flow methods
12. XYZ Company is analyzing a capital investment proposal for a new machinery to produce a new product over
the next 10 years. At the end of ten years, the machinery must be disposed of with a zero net book value but
with a scrap salvage value of P 20,000. It will require some P 30,000 to remove the machinery. The applicable
tax rate is 35%. The approximate “end-of-life” cash flow based on the foregoing information is:
a. Inflow of P 30,000
c. Outflow of P 10,000
b. Outflow of P 6,500
d. Outflow of P 17,000
13. Cost of capital is
a. The amount the company must pay for its plant assets
b. The dividends a company must pay on its equity securities.
c. The cost the company must incur to obtain its capital resources.
d. The cost the company is charged by investment bankers who handle the issuance of equity or long-term
debt securities.
14. For a certain project, the return that investors demand for investing in a firm is known as:
a. DCF rate of return
c. Payback
b. Net present value
d. Cost of capital
15. In an investment in plant asset, the return that should keep the market price of the firm stock unchanged is
a. Net present value
c. Adjusted rate of return
b. Cost of capital
d. Unadjusted return
16. All of the following refer to the discount rate used by a firm in capital budgeting except:
a. Cost of capital
c. Opportunity costs
b. Required rate of return
d. Hurdle rate
17. UVW Company has 5% preferred stock with a par value of P 100. Selling price is P 123.50 per share and
flotation costs are P 0.50 per share. The company's tax rate is 20%. What is the cost of preferred stock?
a. 4.03%
c. 4.7%
b. 4.07%
d. 5%
18. DEF Company is attempting to compute the cost of Internal and external equity. The company's common stock
is currently selling at P 62.50 per share with flotation cost of P5 per share. The next dividend per share is P 5.42,
Earnings and dividends are expected to grow at a constant rate of 5%. What is the cost of new common stock
and retained earnings?
a. C/S: 13.67%; R/E: 13.67%
c. C/S: 13.67%; R/E: 14.43% .
b. C/S: 14.43%; R/E: 13.67%
d. C/S: 14.43%; R/E:14.43%
19. The market value of GHI Company's common stock (book value: P 65M) is estimated at P 60 M and the market
value of its interest bearing debt (book value: P35M) is estimated at P40M. The average before tax yield on
these liabilities is 15% per year. Income taxes are 40%. The company is expected to pay dividend of P 10 per
share and the stock Is selling at a price of P 100 per share. The growth rate of dividend is projected to be 2.5%
per year. What is the weighted average cost of capital (WACC) of the company as a whole?
a. 9%
b. 21.5%
b. 11.1%
c. 25%
20. The weighted average cost of capital approach to decision making is not directly affected by the
a. Value of common stock
b. Current budget for expansion
c. Cost of debt outstanding
d. Proposed mix of debt, equity, and existing funds used to Implement the project
21. A company with cost of capital of 15% plans to finance an investment with debt that bears 10% interest. The rate
it should use to discount the cash flows is
a. 10%
c. 25%
b. 15%
d. Some other rate.
22. Which of the following methods measures the recovery period of a proposed investment?
a. Payback
c. PV payback
b. Bail-out payback
d. All of given
23. The technique that does not use cash flow for capital investment decisions.
a. Payback
c. ARR
b. NPV
d. IRR
24. Which of the following cash flow methods of evaluating capital investment ignores the time value of money?
a. IRR
c. Discounted payback.
b. NPV
d. Payback reciprocal
25. ABC Company is considering a certain project with the following projected cash income after taxes for 4 years,
the life of the project: End of year 1, P 11,000; year 2, P 9,000; year 3, P 8,000; year 4, P 7,000. If the project
requires an investment of P 25,000 with a salvage value of P 5,000, what is the payback period?
a. 2.265 years
c. 2.526 years
b. 2.562 years
d. 2.625 years
26. Which of the following is necessary in order to calculate the payback period for a project?
a. Useful life
c. Net present value
b. Cost of capital
d. Annual cash flow
27. An advantage of using the payback method is that the method is:
a.
Precise in estimates of profitability
b.
Simple to compute
c.
Not based on cash flow data
d.
Insensitive to the life of the project being evaluated
28. HIJ Inc. recently acquired a machine at a cost of P 64,000. It will be depreciated on a straight-line basis over
years, with no estimated salvage value. HIJ estimates that this machine will produce a P 18,000 annual net cash
flow before income tax. Assuming an income tax rate of 50%, ,the appropriate payback period on this investment
is:
a. 3.6 years
c. 7.1 years
b. 4.9 years
d. 12.8 years
29. A company is investigating the possibility of acquiring a machine that will cost P 12,000 and will have annual
depreciation for tax purposes of P 2,400 for 5 years. The machine is expected to result in cash savings from
operations of P 4,000 per year. If the tax rate is 50%, what is the payback period for the new machine?
a. 3 years
c. 5 years
b. 3.75 years
d. 6 years
30. KLM Company is planning to purchase a new machine. The payback period is estimated to be 6 years. The
project's after tax cash flow is estimated to be P 2,000 yearly for the first three years and P 3,000 yearly for the
next three years of the payback period. Annual depredation of P 1,300 will be charged to income for each of the
6 years of the payback period. The machine will cost:
a. P 15,000
c. P 9,000
b. P 12,000
d. P 6,000
31. ABC Company is planning to purchase a new machine for P 30,000. The payback period is expected to be five
years. The new machine is expected to produce cash flows from operations, net of income taxes, of P7,000 a
year in each of the next three years and P 5,500 In the fourth year. Depreciation of P 5,000 a year will be
charged to income for each of the five years of the payback period. What is the amount of cash flow from
operations, net of income taxes, that the new machine is expected to produce In the last (fifth) year of the
payback period?
a. P 1,000
c. P 5,000
b. P 3,500
d. P 8,500
32. As a capital budgeting technique, the pay back period considers depreciation expense (DE) and time value of
money (TMV) as follows:
a. DE, relevant and TVM, relevant
c. DE, irrelevant. and TVM, relevant
b. DE, irrelevant and TVM, Irrelevant
d. DE, relevant and TVM, irrelevant
33. The payback method assumes that all cash inflows are reinvested to yield a return equal to
a. The discount rate
c. The internal rate of return
b. The hurdle rate
d. Zero
34. A project costing P180,000 will produce the following annual cash benefits and salvage value:
End of year
Cash benefits Salvage value
1
P50,000
P70,000
2
50,000
60,000
3
50,000
50,000
What is the bailout payback?
a. 3 years
c. 2.4 years
b. 2.6 years
d. 2 years
35. VWX Company purchased a new machine on January 1 of this year for P 90,000, with an estimated useful life of
5 years and a salvage value of P 10,000. The machine will be depreciated using the straight-line method. The
machine is expected to produce cash flow from operations, net of tax, of P 36,000 a year in each of the next 5
years. The new machine's salvage value is P 20,000 in years 1 and 2, and P 15,000 in years 3 and 4. What will
be the bailout period for this machine?
a. 1.4 years
c. 1.9 years
b. 2.2 years
d. 3.4 years
36. Investment A has a payback period of 5.4 years; investment B, 6.7 years. From this, we can conclude
a.
That investment A has a higher NPV than B
b.
That investment A has a higher IRR than B
c.
That investment A's book rate of return is higher than B's
d.
None of the above
37. When computing for the accounting rate of return (ARR), which of the following is used?
a. Income before depreciation and taxes
c. Income before depreciation but not taxes
b. Income after depreciation and taxes
d. Income after depreciation but before taxes
38. PQR Company is considering the acquisition of a personal computer that costs P 120,000 with an economic life
of 12 years and a terminal salvage value of P 12,000. It is estimated that the increase in net income before taxes
as a result from this investment wilt amount to P 7,000 annually. Income taxes are 35%. The company uses the
straight-line method of depreciation. What is the accounting rate of return on the average cost of investment?
a. 3.79%
c. 6.89%
b. 5.83%
d. 6.98%
39. QQQ, Inc., a calendar year company, purchased a new machine for P 28,000 on January 1, 2006. The machine
has an estimated useful life of eight years with no salvage value and is being depreciated on the straight-line
basis. The accounting (book value) rate of return is expected to be 15% on the initial increase in required
investment. On the assumption of a uniform cash flow, this investment is expected to provide annual cash flow
from operations, net of income taxes, of:
a. P 3,500
c. P4,200
b. P 4,025
d. P7,700
40. The time-value of money means that
a.
A peso today is worth more than a peso in the future.
b.
The longer one waits for a peso, the more uncertain the receipt is
c.
Both of these
d.
None of these
41. Which of the following rate of return methods considers the time value of money?
a. IRR
c. Payback reciprocal
b. ARR
d. None of the given
42. Which of the following methods is a discounted cash flow method for evaluating capital Investment?
a. Payback
c. Internal rate of return
b. Ball-out payback
d. Payback reciprocal
43. Net present value (NPV) is
a.
The sum of discounted cash inflows
b.
The sum of discounted cash outflows
c.
The sum of discounted cash inflows less the sum of the discounted cash outflows
d.
The sum of discounted cash inflows plus discounted cash outflows
44. The discount rate that equates the present value of expected cash flows with the cost of investments is the
a.
Net present value
c. Accounting rate of return
b.
Internal rate of return
d. Payback period
45. Which one of the following is a project ranking method rather than a project screening method?
a. Net present value
c. Profitability index
b. Simple rate of return
d. Sophisticated rate of return
46. A project that has a positive NPV discounted at a rate of 15% would have a discounted rate of return of
a. 0%
c. More than 15%
b. 15%
d. less than 15%
47. In computing the PV of future cash inflows that are uniform, reference will be made to a table that shows
a.
Amount of P1
c. Present value of annuity of P1
b.
PV of P 1
d. Future value of annuity of P 1
48. The present value of P 50,000 due in five years would be highest if discounted at a rate of
a.
0%
c. 15%
b.
10%
d. 20%
49. A project requires an investment of P 40,000 and has a net present value of P 10,000. The project's profitability
Index would be:
a. 0.80
c. 4.0
b. 1.25
d. 1.0
50. Which of the following methods measures cash flows and outflows of a project as if they occurred at a single
point in time?
a. Payback and bail-out payback period
c. Net present value and internal rate of return
b. Accounting and internal rate of return
d. Return on original and average investment
51. The present value and discounted cash flow rate of return methods of evaluating capital expenditure proposals
are superior to the payback method in that they:
a.
Are easier to implement
b.
Consider the time value of money
c.
d.
Requires less input
Reflects the effects of depreciation and income tax
52. A company purchased Machine 123 on March 5, 2005, for P 5,000 cash. The estimated salvage value was P
200 and the estimated life was 11 years. On March 5, 2006, the company learned that It could purchase a
different machine for P 8,000 cash. The new machine would save the company an estimated P 250 per year,
compared to machine 123. The new machine would have no estimated salvage value and an estimated life of 10
years. The company could get P 3,000 from selling Machine 123 on March 5, 2006. Ignoring income tax, the
calculation that would best assist the company in deciding whether to purchase new machine is:
a.
Present value of P 250 for each of the next 10 years + P 3,000 - P 8,000
b.
Present value of P 250 for each of the next 10 years - P 8,000
c.
Present value of P 250 for each of the next 10 years + P 3,000 - P 8,000 - P 5,000
d.
Present value of P 250 for each of the next 10 years + P 3,000 - P 8,000 - P 4,000
53. The effectiveness of the present value method has been appropriately questioned as a capital expenditure
evaluation technique because:
a.
Predicting future cash flows is often difficult and often associated with uncertainties
b.
The average return on Investment method Is more accurate and useful
c.
The payback method is theoretically more reliable
d.
The computation Involves difficult mathematical applications most accountants cannot perform
54. You have been consulted to advise MNO Corp. on the projected acquisition of another production costing P1
million. The line has an expected useful life of five (5) years without any salvage value. The following additional
information was made available:
Year
Estimated Annual Cash Inflow
Present Value of P1
1
P600,000
0.91
2
300,000
0.76
3
200,000
0.63
4
200,000
0.53
5
200,000
0.44
TOTAL
P1,500,000
3.27
Assuming that the cash flow is generated evenly during the year, your advice is
a. To invest due to net present value of P521,280
b. To invest due to net present value of P94,000
c. To invest due to net advantage of P500,000
d. To invest due to net present value of P635,000
55. Assume the same data in No. 54, only that the annual cash inflow was uniform through the years, how much is
the net present value?
a. P94,000
c. P91,000
b. (P19,000)
d. Cannot be determined from information
56. What capital budgeting methods assumes that the funds are reinvested at the company’s cost of capital?
a. Payback
c. Net present value
b. Accounting rate of return
d. Time adjusted rate of return
57. UVW, Inc. acquired a turning machine that has a useful life of 10 years with no salvage value. The incremental
annual net income before taxes is P8,500. Income taxes are 25% each year. The PV of an annuity of p1 for 10
years at 18% (the company’s cost of capital) is 4.494. Annual depreciation is P5,000. The NPV is positive
P1,119.25. How much is the amount of investment?
a. P30,000
c. P50,000
b. P40,000
d. P60,000
58. A project costing P28,715 will produce the following cash benefits after taxes:
End of year
After-tax cash benefits
1
P11,000
2
15,000
3
18,000
The company’s cost of capital is 16%. The PV of P1 for one year at 16% is 0.862; for two years is 0.743; for
three years is 0.641. What is the discounted (PV) payback period?
a. 1.7 years
c. 2.3 years
b. 2 years
d. 2.7 years
59. Consider an investment with the following cash inflows:
Year
Cash flows
PV of P1 at 14%
0
(P31,000)
1.000
1
10,000
0.877
2
20,000
0.770
3
10,000
0.675
4
10,000
0.592
What is the profitability index?
a. 1.824
c. 1.482
b. 1.284
d. 1.842
60. Ignoring income taxes, how are the following used in the calculation of the net present value of a proposed
project?
Depreciation expense
Salvage value
a. Include
Include
b. Include
Exclude
c. Exclude
Include
d. Exclude
Exclude
61. If an Investment has a positive NPV
a. Its IRR is greater than the company's cost of capital
b. Cost of capital exceeds the cutoff rate of return
c. Its IRR is less than the company's cutoff rate of return
d. the cutoff rate of return exceeds cost of capital
62. DEF Company purchased a machine, which will be depreciated on the straight-line basis over an estimated
useful life of seven years and no salvage value. The machine is expected to generate cash flows from
operations, net of income taxes of P 80,000 in each of the seven years. DEF's expected rate of return is 12%.
Information on present value factors is as follows:
Present value of Plat 12% for seven periods:
0.452
Present value of an ordinary annuity of Plat 12% for 7 periods: 4.564
Assuming a positive net present value of P 12,720, what is the cost of the machine?
a. P 240,400
c. P 352,400
b. P 253,120
d. P 377,840
63. On January 1, a company invested in an asset with a useful life of 3 years. The company's expected rate of
return is 10%. The cash flow and present and future value factors for tile 3 years are as follows:
Year
Cash inflows
Present value of P 1 @ 10%
Future value of P 1 @ 10%
1
P8,000
0.91
1.10
2
P 9,000
0.83
1.21
3
P 10,000
0.75
1.33
All cash inflows are assumed to occur at year-end. If the asset generates a positive net present value of P2,000,
what was the amount of the original investment?
a. P 20,250
c. P 30,991
b. P 22,250
d. P 33,991
64. An investment in a new piece of equipment costing P 50,000 is expected to yield the following over its 5-year
useful life: Revenues (cash), P 40,000; operating costs (cash), P 18,000; depreciation, P 10,000. The present
value of P 1 received annually for 5 years and discounted at the company's cost of capital is 4.10 assuming that
all cash flows occur at year-end. The benefit cost ratio (profitability Index) for this piece of equipment, ignoring
tax effect, is
a. 0.984
c. 1.804
b. 1.200
d. 2.200
65. The internal rate of return (IRR) is the
a. Hurdle rate
b. Rate of return for which the net present value is greater than 1.0
c. Rate of return generated from the operational cash flows
d. Rate of return for which the net present value is equal to zero
66. STU, Inc. is planning to invest P 120,000 in a 10-year project. STU estimates that the annual cash inflow, net of
income taxes, from this project will be P 20,000. STU’s desired rate for return on investments of this type is 10%.
Information on present value factors is as follows:
@ 10%
@ 12%
Present value of P 1 for 10 periods
0.386
6.145
Present value of an annuity of P 1 for 10 periods
0.322
5.650
STU's expected rate of return on this investment is
a. Less than 10%, but more than 0%
c. Less than 12%, but more than 10%
b. 10%
d. 12%
67. Which of the following is a basic difference between IRR and ARR criteria for evaluating investments?
a. IRR emphasizes expenses; ARR emphasizes expenditures
b. IRR emphasizes revenues; ARR emphasizes receipts
c. IRR is used for internal investments; ARR Is used for external investments
d. IRR concentrates on receipts and payments; ARR concentrates on revenues and expenses.
68. Qualitative issues could increase the acceptability of a project under which of the following conditions?
a. The IRR is more than the company's cutoff rate
b. The projected has a positive NPV
c. The payback period is shorter than the. industry standards for payback
d. All of the above
69. A company is considering a capital investment for which the Initial cash outlay is P 20,000. Net cash flows from
operations, net of income taxes, are predicted to be P 4,000 for 10 years. Assume a cost of capital of 12%.
present value of an annuity of P 1 for 10 years at various rates are as follows:
Discount Rate
PV Factor
14$
5.216
15%
5.018
16%
4.833
17%
4.658
What is the company's internal rate of return? (Choose the best answer)
a. 15.1%
c. 15.3%
b. 15.2%
d. 15.4%
70. A planned factory expansion project has an estimated initial cost of P 800,000. Using a 20% discount rate/ the
present value of future cost savings from the expansion is P 843,000. To yield exactly a 20% time adjusted rate
of return, the actual investment cost cannot exceed the P 800,000 estimate by more than:
a. P 160,000
c. P 43,000
b. P 20,000
d. P 1,705
71. FGH Corporation is planning to invest P 80,000 in a three-year project FGH's expected rate of return is 10%.
The present value of P1 at 10% for 1 year is 0.909, for two years is 0.826 and for the three years is 0.751. The
cash flows, net of income taxes, will be P 30,000 for the first year (present value: P 27,270) and P 36/000 for the
second year (present value: P 29,736). Assuming the rate of return is exactly 10%, what will be the net cash
flow, net of income taxes, for the third year?
c. P 17,260
c. P 22,904
d. P 22,000
d. P 30,618
72. All of the, following are methods that aid management in analyzing the expected results of capital budgeting
decisions, except
a. Accrual accounting rate of return
c. Discounted cash flow rate of return
b. Payback method
d. Future value of cash flow
73. The reason for using probabilities in capital budgeting decision is:
a. Risk and uncertainty
c. Time value of money
b. Cost of capital
d. Projects with unequal lives
74. If applied in capital budgeting evaluation, sensitivity analysis
a. Is used extensively when cash flows are known with certainty.
b. Is a "what if” technique that asks how a given outcome will change if the original estimate's of the
capital budgeting model are changed.
c. Measures the amount of time it will take for a project to recover its initial capital outflow.
d. Is a technique used to rank various capital projects.
75. Which of the following combinations is possible?
Profitability Index
NPV
IRR
a. Greater than 1
Positive
Equals cost of capital
b. Greater than 1
Negative
Less than cost of capital
c. Less than 1
Negative
Less than cost of capital
d. Less than 1
Positive
Less than cost of capital
76. JKL Co. uses a 12% hurdle rate for ali capital expenditures. It has lined up four projects:
In Thousand Pesos
Initial cash outflow
Project 1
Project 2
Project 3
Project 4
Annual net cash inflows
400
596
496
544
Year 1
130
200
160
190
Year 2
140
270
190
250
Year 3
160
180
180
180
Year 4
80
130
160
160
Net present value
(7,596)
8,552
28,128
29,324
Profitability Index (%)
98%
101%
106%
105%
Internal rate of return
11%
13%
14%
15%
If the company has no budgetary limitations, which projects should be pursued?
a. Projects 3 and 4
c. Projects 2, 3 and 4
b. Project 4
d. All the four projects
77. LMNO Corporation is contemplating four projects, L, M, N, and O. The capital costs for the initiation of each
project and its estimated after-tax, net cash flows are listed below. The company's desired after-tax opportunity
costs is 12%. It has P 900,000 capital budget for the year. Idle funds cannot be reinvested at greater than 12%.
In thousand pesos
Initial cash outflow
L
M
N
O
Annual net cash inflows
400
470
380
420
Year 1
113
180
90
80
Year 2
113
170
110
100
Year 3
113
150
130
120
Year 4
113
110
140
130
Year 5
113
100
150
150
Net present value
P7,540
P59,654
P54,666
(P15,708)
Profitability index
1.02
1.13
1.14
0.96
Internal rate of return
12.7%
17.6%
17.2%
10.6%
The company will choose:
a. Projects, M, N, and 0
b. Projects M and N
c. Projects Land N
d. Projects Land M
78. A company's marginal cost of new capital is 10% up to P 600,000. It increases 0.5% for the next P 400,000 and
another 0.5% thereafter. Several propose capital project are under consideration, with projected cost and internal
rates of return as follows:
Project
Cost
IRR
A
P 100,000
10.5%
B
P 300,000
14.0%
C
P 450,000
10.8%
D
P 350,000
13:5%
E
P 400, 000
12.0%
What should the company's capital budget be?
a. P 650,000
b. P 1,050,000
c. P 1,500,000
d. P 1,600,000
79. For P 450,000, BCD Corp. purchased a new machine with an estimated useful life of five years with no salvage
value. The machine is expected to produce cash flow from operations, net of 40% income taxes, as follows:
First year
P 160,000
Second year
140,000
Third year
180,000
Fourth year
120,000
Fifth year
100,000
BCD Corp. will use the sum-of-years-digits' method to depreciate the new machine:
First year
P 150,000
Second year
120,000
Third year
90,000
Fourth year
P 60,000
Fifth year
30,000
The present value of P 1 for 5 periods at 12% is 3.60478. The present values of P1at 12% at end of each period
are:
Period
PV factor
1
0.89280
2
0.79719
3
0.71178
4
0.63552
5
0.56743
Had BCD used the straight-line method of depreciation, what is the difference in net present value provided by
the machine at a discount rate of 12%?
a. Increase of P 9,750
c. Decrease of P 24,376
b. Decrease of P 9,750
d. Increase of P 24,376