Tag: Capital Investment

Accounting Multiple Choice Question – 11 November 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Alex Trading Ltd invests in a project which cost £210,000.

The project will yield annual cash flows of £90,000 for each of the next three years.

After providing annual depreciation of £10,000 the project will yield an annual profit of £80,000.

What is the payback period, assuming profits and depreciation arise at the year-end?

Select ONE answer:

  1. 2.33 years
  2. 2.50 years
  3. 2.62 years
  4. 3 years

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

  1. Correct – £210k – £90k – £90k – £30k / £90k == > 2 1/3 years
  2. Not correct
  3. Not correct
  4. Not correct

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Accounting Multiple Choice Question – 21 September 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Alex ltd is considering buying equipment at a cost of £80,000.

This equipment will save £40,000 per annum in operating costs over the next three years, after which it will have no scrap value.

Using the following discount factors:

  • year 0 – 1.000
  • year 1 – 0.909
  • year 2 – 0.826 
  • year 3 – 0.751

What is the net present value of the equipment?

Select ONE answer:

  1. £(10,600)
  2. £19,440
  3. £40,000
  4. £99,440

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

  1. Not correct
  2. Correct = -£80k + (£40k *0.909) + (£40k * 0.826) + (£40k * 0.751)
  3. Not correct
  4. Not correct

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Accounting Multiple Choice Question – 20 September 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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What would NOT be included in a net present value (NPV) capital investment appraisal?

Select ONE answer:

  1. any expenditure incurred after the payback period
  2. depreciation of capital expenditure
  3. increase in working capital
  4. residual value of the capital cost

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

  1. Not correct
  2. Correct
  3. Not correct
  4. Not correct

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This work is licensed under a Creative Commons Attribution 4.0 International License.

Accounting Multiple Choice Question – 27 July 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Discounting methods have been used to evaluate an investment project over a three year life.

The project will produce annual net inflows of £2M.

£500,000 of the initial investment can be recovered at the end of the third year.

Discount factors at 10 % are:

  • Year 1 – factor 0.91
  • Year 2 – factor 0.83
  • Year 3 – factor 0.75

What is the present value of project cash inflows?

Select ONE answer:

  1. £4.98M
  2. £5.36M
  3. £5.48M
  4. £6.38M

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

  1. Not correct
  2. Correct – Y1 £2M * 0.91 = £1.82M + Y2 £2M * 0.83 = £1.66M + Y3 £2M * 0.75 = £1.5M + IV £0.5M * 0.75 = £0.375M == > £5.36M
  3. Not correct
  4. Not correct

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Accounting Multiple Choice Question – 26 July 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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The following four methods are used to evaluate projects.

  • accounting rate of return
  • internal rate of return
  • net present value
  • payback

Which methods are based on using cash flows?

Select ONE answer:

  1. 1,2,3 and 4
  2. 1,3 and 4 only
  3. 2,3 and 4 only
  4. 2 and 3 only

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

  1. Not correct
  2. Not correct
  3. Correct
  4. Not correct

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This work is licensed under a Creative Commons Attribution 4.0 International License.