Posted: April 24th, 2016

Review conducted to determine whether a project actually generated the results that were originally expected?

Problem #1
Matching. Select the term from the list provided that bests matches each of the following definitions or descriptions. Put the number of the term in the answer column.

Your Answer Definition or Description Term
A. The concept that recognizes that the present value of an opportunity to receive one dollar in the future is less than one dollar 1. Accumulated conversion factors
B. Annuity with the cash flows occurring at the end of each period 2. Annuity
C. Paid to investors and creditors for the use of their assets 3. Capital investments
D. Review conducted to determine whether a project actually generated the results that were originally expected 4. Cost of capital
E. Factors used to convert a series of future cash inflows into their present value equivalent 5. Internal rate of return
F. The rate that produces a net present value of zero for an investment in a capital project 6. Minimum rate of return
G. Purchase of long term operational assets that involves a long term commitment of funds 7. Net present value method
H. Technique that evaluates investment opportunities by determining the length of time necessary to recover the initial net investment . Ordinary annuity
I. Measure of profitability computed by dividing the average incremental increase in annual net income by the average investment cost . Payback method
J. An equal series of cash flows received over equal intervals of time at a constant rate of return 10. Postaudit
K. Rate of return required to persuade a company to accept an investment opportunity 11. Time value of money
L. Evaluation technique in which future cash flows are discounted back to present value equivalents, from which the cost of the investment is subtracted 12. Unadjusted rate of return

Problem #2
Bigtime Video is considering installing tanning beds in its video rental stores. The beds cost $200,000 and have an estimated six-year useful life. Ignore income taxes. The following pro forma income statement is provided: