MANAGEMENT ADVISORY SERVICES

MABALACAT CITY COLLEGE

1. Management accounting
A. is governed by generally accepted accounting principles.
B. draws from disciplines other than accounting.
C. is geared primarily to the past rather than the future.
D. places more emphasis on precision of data compared with financial accounting which does snot.

2. The following characteristics refer to Financial Accounting except

A. provides information to external users
B. emphasizes on objective data
C. has no externally imposed standards
D. generates general purpose financial statements

3. Which of the following is not a characteristic of Management Advisory Services?

A. MAS is broad in scope
B. MAS involves problem-solving affecting the future operations of the client
C. Beneficiary of service is management
D. MAS is repetitive as far as the same client is concerned

4. Which of the following statements is false?

A. At zero production level, variable costs are usually zero.
B. At zero production level, total costs equal total fixed costs.
C. At zero production level, fixed costs are positive.
D. At zero production level, fixed costs is also zero.

5. The following statements are all true, except:

A. As volume increases, variable costs per unit increase.
B. As volume increases, fixed costs per unit decrease.
C. Only prime costs have a positive identification with the product manufactured.
D. With selling price remaining the same, the higher the variable cost, the higher the break-even volume.

6. Which of the following graphs illustrates the behavior of a total variable cost?
Graph 1 Graph 2

Total units produced Total units produced

Graph 3 Graph 4

Total units produced Total units produced

A. Graph 2 C. Graph 4
B. Graph 3 D. Graph 1

7. Cost-volume-profit analysis is most important for the determination of the

A. volume of operation necessary to break-even
B. relationship between revenues and costs at various levels of operations
C. variable revenues necessary to equal fixed costs
D. sales revenue necessary to equal variable costs

8. The additional cost to produce one more unit of product is called

A. decremental cost C. marginal cost
B. fixed cost. D. sunk cost.
9. The following diagram is a cost-volume-profit graph for a manufacturing company.

E
Peso
D C

A B

Volume

The difference between line AB and line AC (area BAC) is the

A. contribution ratio D. total fixed cost
B. total variable cost. E. total contribution margin

10. The traditional method of product costing in which both fixed and variable manufacturing costs are treated as
product costs and charged to inventories.
A. Direct costing. C. Full or absorption costing.
B. Discretionary costing. D. Correct answer not given.

11. Both Company Y and Company Z produce similar products that need negligible distribution costs. Their assets
operation and accounting are very similar in all respects except that Company Y uses direct costing and Company Z
uses absorption costing.
A. Co. Y would report a higher inventory value than Co. Z for the years in which production exceeds sales
B. Co. Y would report a higher inventory value than Co. Z for the years in which production exceeds the normal or
practical capacity
C. Co. Z would report a higher inventory value than Co. Y for the years in which production exceeds sales
D. Co. Z would report a higher net income than Co. Y for the years in which production equals sales

12. Operating income using direct costing as compared to absorption costing would be higher
A. Under no circumstances.
B. When the quantity of beginning inventory is more than the quantity of ending inventory.
C. When the quantity of beginning inventory equals the quantity of ending inventory.
D. When the quantity of beginning inventory is less than the quantity of ending inventory.

13. Which one of the following terms best describes the rate of output which qualified workers can achieve as an average
over the working day or shift, without over-exertion, provided they adhere to the specified method of working and
are well motivated in their work?
A. Standard time C. Standard hours
B. Standard performance D. Standard unit

14. To which of the following is a standard cost nearly like?

A. Estimated cost. C. Product cost.
B. Budgeted cost. D. Period cost.

15. The fixed factory O/H application rate is a function of a predetermined activity level. If standard hours allowed for
good output equal this predetermined activity level for a given period, the volume variance will be
A. zero
B. favorable
C. unfavorable
D. either favorable or unfavorable, depending on the budgeted O/H

16. The sales manager of Alpha Electronics submitted a proposal to increase its production of digital watches. As part of
the data presented, he reported the total additional cost required for the proposed increase in production. The
increase in total cost is known as
A. controllable cost C. opportunity cost.
B. incremental cost D. relevant cost.

17. Statement 1: In general, all variable costs are relevant to decisions, but all fixed costs are not.
Statement 2: Fixed costs need not be considered in making a decision unless they are expected to be altered by that
decision, either immediately or in the future.
Statement 3: Costs that is relevant to management decision making usually include all expected future costs.
A. B. C. D.
Statement 1 True False True False
Statement 2 True True False False
Statement 3 True False True True
18. The decision to employ a resource in a specific way implies giving up the returns from other possible uses of the
same resource. Such returns are considered costs of the alternative chosen as they are profits of the alternative
forgone. These costs must be evaluated by the decision-maker and they are called
A. Opportunity costs C. Standard costs
B. Incremental costs D. Manufacturing costs

19. These statements are proper to the budgeting process except:

A. it is a part of management’s responsibility to plan the use of its resources.
B. it is a tool to orchestrate the various functions of operations in a business.
C. the involvement of the various levels of individuals in the company is necessary to gain its acceptance and attain
its goals.
D. actual results need not be compared with plan, since the process ends after budget is approved.

20. Which of these statements are advantages of profit planning?

1. Develops profit-mindedness, encourages cost consciousness and resources utilization throughout the company.
2. Provides vehicle to communicate objectives, gain support for the plan, of what is expected, thereby developing a
sense of commitment to achieve established goals.
3. Provides yardstick to evaluate actual performance; encouraging efficiency, increasing output and reducing cost.
4. Provides a sense of direction for the company and enhances coordination of business activity.
5. Eliminates or takes over the role of administration by providing detailed information that allows executives to
operate toward achievement of the organization’s objectives.
A. Statements 3, 4, and 5 only. C. Statements 1, 3, and 4 only.
B. All five statements. D. Statements 1, 2, 3, and 4 only.

21. For a company that does not have resource limitations in what sequence would the budgets be prepared?
1. cash budget 4. production budgets
2. sales budget 5. purchase budgets
3. inventory budgets
A. sequence 2, 3, 4, 5 and 1 C. sequence 2, 4, 3, 5 and 1
B. sequence 2, 3, 4,1 and 5 D. sequence 4, 3, 2, 1 and 5

22. Data portrayed in comparative financial statements are useful

A. in analyzing the sources of increase in assets
B. to indicate earnings and costs trends
C. in analyzing changes in gross and net earnings
D. in performing (a) and (c) above only
E. in accomplishing all of the above

23. Which of the following accounts would be included in the calculation of a company’s acid test ratio?
A. B. C. D.
Accounts receivable No No Yes Yes
Inventories No Yes Yes No

24. Inventory turnover indicates

A. how many times in the course of a year the company is able to sell the amount of its average inventory.
B. the flow assumption which provides the most current valuation in the balance sheet.
C. the average time period between the purchase of inventory and conversion of this inventory back to cash.
D. the pattern of transferring units costs from the inventory account to the cost of goods sold.

25. Which of the following statements is most correct?

A. Since the money is readily available, the cost of retained earnings is usually a lot cheaper than the cost of debt
financing.
B. When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock
dividends are tax deductible.
C. When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are tax
deductible.
D. Statements a and b are correct.
E. Statements b and c are correct.

26. When calculating the cost of capital, the cost assigned to retained earnings should be
A. Zero.
B. Lower than the cost of external common equity.
C. Equal to the cost of external common equity.
D. Higher than the cost of external common equity.

27. Which of the following will increase a company’s retained earnings break point?
A. An increase in its net income.
B. An increase in its dividend payout.
C. An increase in the amount of equity in its capital structure.
D. An increase in its capital budget.
28. Which firm tends to have higher operating leverage?
A. A firm with high fixed costs and low variable costs
B. A firm with high fixed costs and high variable costs
C. A firm with low fixed costs and high variable costs
D. A firm with low fixed costs and low variable costs

29. In regression analysis, which of the following correlation coefficients represents the strongest relationships between
the independent and dependent variables?
a. 1.03 c. -0.89
b. -0.02 d. 0.75

30. If the present value of the future cash flows for an investment equals the required investment, the IRR is
a. equal to the cutoff rate.
b. equal to the cost of borrowed capital.
c. equal to zero.
d. lower than the company's cutoff rate of return.

PROBLEMS
31. The total production cost for 20,000 units was P21,000 and the total production cost for making 50,000 units was
P34,000. Once production exceeds 25,000 units, additional fixed costs of P4,000 were incurred. The full production
cost per unit for making 35,000 units is:
A. P0.73 C. P0.84
B. P0.78 D. P0.90

32. As part of a cost study, the cost accountant of Rod Laman Inc. has recorded the cost of operations at seven different
levels of material usage. This information is shown as follows:
Kilos of Materials Cost of Operations
100 P1,000
75 600
25 400
150 1,500
175 1,600
50 600
125 1,300
Sum of the kilos (X) 700 Sum of the costs (Y) P7,000
Sum of kilos multiplied by costs ((XY)) P852,500
Sum of the kilos squared ((X)2) 87,500
Using the least squares method, the fixed portion of the cost is
A. P109 C. P200
B. P129 D. P271

33. The following information was taken from a computer printout generated with the least squares method for use in
estimating overhead costs:
Slope 90
Intercept 11400
Correlation coefficient 0.6
Activity variable Direct labor hours
The cost formula is
A. OVERHEAD = P11,400 - P90X C. OVERHEAD = P11,400 + (P45 X 0.6)
B. OVERHEAD = P11,400 + P90X D. OVERHEAD = P11,400 X 0.6

34. The estimated operating income of GREEN PLASTICS CO. for the production of plastic bags for the year ended
December 31, 2016 is arrived as follows:
Sales P 11,250
Cost of sales:
Direct materials P1,685
Direct labor 1,575
Variable factory overhead 1,125
Fixed factory overhead 562 4,947
Gross Profit P 6,303
Selling and administrative expenses
Variable expenses P2,365
Fixed expenses 1,538 P 3,903
NET OPERATING INCOME P 2,400
How much sales would be necessary in order to break-even?
A. P3,500 C. P4,500
B. P6,750 D. P5,250
35. Tropical Stuff Toys manufactures and sells dolls. The following information relates to the operating results for the
last quarter:
Stuff toys sold 19,375
Break-even point in number of toys 15,500
Break-even point in peso sales P65,875
Total fixed costs P47,275
What was Tropical Stuff Toys variable cost per doll?
A. P4.25 C. P1.20
B. P3.05 D. P0.96

36. Phil. Frames Inc. has the following revenue and cost budgets for the two products it sells
Plastic Frames Glass Frames
Sales price P 50.00 P 75.00
Direct materials (10.00) (15.00)
Direct labor (15.00) (25.00)
Fixed overhead (15.00) (20.00)
Net income per unit P 10.00 P 15.00
Budgeted unit sales 100,000 300,000
The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at
P4,875,000. Assume that the company plans to maintain the proportional mix. In numerical calculations, the
company rounds to the nearest centavo and unit. The total number of units the company needs to produce and sell
to breakeven is
A. 300,000 units C. 150,000 units
B. 354,545 units D. 75,000 units

Use the following information for the next two questions.

Stober Company produces a specialty item. Management has provided the following information:
Actual sales 60,000 units
Budgeted production 50,000 units
Selling price P40.00 per unit
Direct material costs P10.00 per unit
Variable manufacturing overhead P3.00 per unit
Variable administrative costs P5.00 per unit
Fixed manufacturing overhead P4.00 per unit

37. What is the cost per statue if throughput costing is used?

a. P22.00 c. P15.00
b. P19.00 d. P10.00

38. What is the total throughput contribution?

a. P1,500,000 c. P1,380,000
b. P1,620,000 d. P1,800,000

39. The following operating data are available from the records of BONAN CO. for the month of January 2016.
Sales @ P70 per unit P210,000
Production 3,280 units
Beginning inventory None
Costs Variable Cost Fixed Cost
Direct materials 59,200
Direct labor 48,000
Manufacturing overhead 24,000 36,080
Marketing and General Expenses 5% of sales 21,000
The net income for the month under variable costing method would be
a. P32,920 c. P23,320
b. P25,500 d. P22,420

40. With a production of 200,000 units of Product A during the month of June, Martin Corporation has incurred costs as
follows:
Variable Costs Fixed Costs
Direct materials P200,000
Direct labor 135,000
Manufacturing overhead 75,000 P90,000
Selling & general 30,000 85,000
expenses
Under absorption costing, the unit cost of Product A was
a. P2.20 c. P3.15
b. P2.50 d. P2.05

41. Youthful Biscuits manufactures and sells boxed coconut cookies. The biggest market for these cookies are as gifts
that college students buy for their business teachers. There are 100 cookies per box. The following income
statement shows the result of the first year of operations. This statement was the one included in the company’s
 annual report to the stockholders.

Sales (400 boxes at P12.50 a box) P5,000.00

Less: Cost of goods sold (400 boxes at P8 per box) 3,200.00
Gross margin 1,800.00
Less: Selling and administrative expenses 800.00
Net income 1,000.00

Variable selling and administrative expenses are P0.90 per box sold. The company produced 500 boxes during the
year. Variable manufacturing costs are P5.25 per box and fixed manufacturing overhead costs total P1,375 for the
year.
What is the company’s direct costing net income?
a. P2,540 c. P1,000
b. P2,265 d. P 725

42. Information on the direct material costs of Bernal Manufacturing Corp. is as follows:
Actual direct material costs P 44,000
Actual units of direct material used 22,000
Standard price per unit of direct material P2.20
Direct material efficiency variance-unfavorable P2,800
What was Bernal’s direct material price variance?
A. P4,400 favorable. C. P5,600 favorable.
B. P4,400 unfavorable. D. P5,600 unfavorable.

Use the following information for the next two questions.

Slim Candle Co. manufactures candles in various shapes, sizes, colors, and scents. Depending on the orders received,
not all candles require the same amount of color, dye, or scent materials. Yields also vary, depending upon the usage of
beeswax or synthetic wax. Standard ingredients for 1,000 pounds of candles are
Standard Mix Standard Cost per Pound
Input:
Beeswax 200 lbs. 1.00
Synthetic wax 840 lbs. 0.20
Colors 7 lbs. 2.00
Scents 3 lbs. 6.00
Totals 1,050 lbs. 9.20
Standard output 1,000 lbs.
Price variances are charged off at the time of purchase. During January, the company was busy manufacturing red
candles for Valentine’s Day. Actual production then was:
Input In pounds
Beeswax 4,100
Synthetic wax 13,800
Colors 2,200
Scents 60
Total 20,160
Actual output 18,500

43. The materials mix variance is

A. P280 unfavorable. C. P3,940 unfavorable.
B. P280 favorable. D. P3,940 favorable.

44. The materials yield variance is

A. P280 unfavorable. C. P3,940 unfavorable.
B. P280 favorable. D. P3,940 favorable.

45. Information on Bustos Manufacturing Company’s overhead costs is as follows:

Budgeted overhead based on standard direct-labor hours allowed P90,000
Budgeted overhead based on actual direct-labor hours allowed P89,000
Standard applied overhead P86,000
Actual overhead P92,000
What is the total overhead variance
A. P4,000 favorable. C. P8,000 unfavorable.
B. P6,000 unfavorable. D. P9,000 favorable.

46. The following is a standard cost variance analysis report on direct labor cost for a division of a manufacturing
company.
Job Actual Hours at Actual Hours at Standard Hours at
Actual Wages Standard Wages Standard Wages
213 P3,243 P3,700 P3,100
215 15,345 15,675 15,000
217 6,754 7,000 6,600
219 19,788 18,755 19,250
 221 3,370 3,470 2,650
Totals P48,500 P48,600 P46,600
What is the total flexible budget direct labor variance for the division?
A. P1,00 unfavorable. C. P1,900 favorable.
B. P1,900 unfavorable. D. P2,000 unfavorable.

47. A firm needs two component parts X and Y, which can be manufactured or purchased. In producing the parts,
factory overhead is applied at P1.00 per standard machine hour. The fixed capacity costs, which will remain
unchanged, whether the parts will be produced or purchased represent 50% of the applied overhead. Standard costs
and other information for the two component parts used by the firm are presented below
Part X Part Y
Direct material P 0.50 P 12.00
Direct labor 1.50 7.00
Factory overhead 6.00 3.00
Unit standard costs P 8.00 P 22.00
Units needed per year 9,000 12,000
Machine hours per unit 6 3
Total hours available 45,000
Unit cost if purchased P 7.40 P 22.50
The relevant unit production costs that should be considered in the decision to schedule the 45,000 hours available
machine time in order to realize the maximum potential cost savings are
a. b. c. d.
X P 8.00 P 7.40 P 5.00 P 1.50
Y P22.00 P22.50 P20.50 P19.00

48. Chow Inc. has its own cafeteria with the following annual costs
Food P 400,000
Labor 300,000
Overhead 440,000
Capital P1,140,000
The overhead is 40% fixed. Of the fixed overhead, P100,000 is the salary of the cafeteria supervisor. The
remainder of the fixed overhead has been allocated from total company overhead. Assuming the cafeteria
supervisor will remain and that Chow will continue to pay said salary, the maximum cost Chow will be willing to pay
an outside firm to service the cafeteria is
a. P1,140,000 c. P700,000
b. P1,040,000 d. P964,000

49. PQR Company expects to incur the following costs at the planned production level of 10,000 units:
Direct materials P100,000
Direct labor 120,000
Variable overhead 60,000
Fixed overhead 30,000
The selling price is P50 per unit. The company currently operates at full capacity of 10,000 units. Capacity can be
increased to 13,000 units by operating overtime. Variable costs increase by P14 per unit for overtime production.
Fixed overhead costs remain unchanged when overtime operations occur. PQR Company has received a special
order from a wholesaler who has offered to buy 2,000 units at P45 each.
What is the incremental cost associated with this special order?
a. P84,000 c. P62,000
b. P31,000 d. P42,000

50. High Class Townhouse, Inc. manages five upscale townhouse in Makati, Ortigas, and Greenhills area. Shown below
are the summary income statements for each complex:
In Thousand Pesos
One Two Three Four Five
Rent Income 10,000 12,100 23,470 18,780 10,650
Expenses 8,000 13,000 26,000 24,000 13,000
Profit 2,000 (900) (2,530) (5,220) (2,350
Included in the expenses is P12,000,000 of corporate overhead allocated to the townhouse based on rental income.
The complex that the company should consider selling is (are)
a. Three, Four & Five. c. Two, Three, Four & Five.
b. Four & Five. d. Four.

51. Julius International produces weekly 15,000 units of Product JI and 30,000 units of JII for which P800,000 common
variable costs are incurred. These two products can be sold as is or processed further. Further processing of either
product does not delay the production of subsequent batches of the joint products. Below are some information:
JI JII
Unit selling price without further processing P24 P18
Unit selling price with further processing P30 P22
Total separate weekly variable costs of further processing
P100,000 P90,000
 To maximize Julius’ manufacturing contribution margin, the total separate variable costs of further processing that
should be incurred each week are
a. P95,000 c. P100,000
b. P90,000 d. P190,000

52. TGF, Inc. assembles special transistors. Its fixed and variable production costs per transistor, based on a volume of
250,000 units is P50 plus an additional amount of P35 per unit for variable selling and administrative expenses.
Corporate policies has established 80% as target mark-up on production cost. The selling price of each transistor is
A. P85.00 C. P75
B. P153 D. P90

Use the following information for the next four questions.

Karmee Company has been accumulating operating data in order to prepare an annual profit plan. Details regarding
Karmee’s sales for the first six months of the coming year are as follows:
Estimated Monthly Sales Type of Monthly Sale
January P600,000 Cash sales 20%
February 650,000 Credit sales 80%
March 700,000 Collection Pattern for Credit Sales
April 625,000 Month of sale 30%
May 720,000 One month following sale 40%
June 800,000 2nd month following sale 25%
Karmee’s cost of goods sold averages 40% of the sales value. Karmee’s objective is to maintain a target inventory equal
to 30% of the next month’s sales. Purchases of merchandise for resale are paid for in the month following the sale.

53. The amount of cash collected in March for Karmee Company from the sales made during March will be
A. P140,000 C. P350,000
B. P308,000 D. P636,000

54. Karmee Company’s total cash receipts for the month of April will be
A. P504,000 C. P653,000
B. P629,000 D. P707,400

55. The purchase of merchandise that Karmee Company will need to make during February will be
A. P254,000 C. P266,000
B. P260,000 D. P338,000

56. The amount for cost of goods sold that will appear on Karmee Company’s pro form income statement for the month
of February will be
A. P195,000 C. P260,000
B. P254,000 D. P272,000

Use the following information for the next three questions.

The following data pertain to the financial statements of Victory Corp. for 2016:
Jan. 1, 2016 Dec. 31, 2016
Assets
Cash P 25,000 P 37,500
Accounts receivable 62,500 62,500
Inventory 175,000 325,000
Building 1,250,000 1,125.000
Liabilities
Accounts payable P 50,000 P 50,000
Bonds payable 187,500 187,500
Equity
Common stock P1,000,000 P1,000,000
Retained earnings 265,000 300,000
No. of shares of common stock 100,000 100,000
outstanding

Net sales – Cash P250,000

Credit 750,000
Net income before 125,000
dividends
Dividends paid 25,000

57. The accounts receivable turnover for the year 2016 is

A. 6.0 times C. 12.0 times
B. 8.6 times D. 16.0 times

58. The asset turnover for the year 2016 is

A. 0.65 times C. 12.25 times
B. 1.19 times D. 15.31 times.
59. The rate of return on shareholders’ equity for the year 2016 is
A. 6.5% C. 8.2%
B. 7.8% D. 9.7%

60. An enterprise has excess capacity in production-related property, plant, and equipment. If in a given year these
assets are being used to only 80% of capacity and the sales level in that year is 2 million, the full capacity sales level
is
A. 1,600,000 C. 2,500,000
B. 2,000,000 D. 10,000,000

61. Clearer Paint Company has plants in 3 major cities. Sales for last year were P100 million, and the balance sheet at
year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets
(including fixed assets) and current liabilities will vary directly with sales. Clearer Paint is already using assets at full
capacity.
Balance Sheet
(in million pesos)

Assets Liabilities & Stockholders’ Equity

Current assets P50 Accounts payable & P25
accruals
Notes payable – long-term 30
Fixed assets 40 Common Stock 15
Retained Earnings 20
Total 90 Total 90
Clearer Paint has an after- tax profit margin of 5%, and a dividend payout ratio of 30%. If sales grow by 10% next
year, the required new financing (RNF) to finance the expansion is
A. P4,850,000 C. P2,650,000
B. P3,000,000 D. P5,000,000

62. A firm's balance sheet as of December 31 is shown below. The firm's sales for the year were P1,000,000,000, and its
after-tax margin on sales was 5%. Sales are expected to increase next year to P1,300,000,000, and it plans to
distribute 50% of its net profits to stockholders. Based on the percentage-of-sales method, the amount of funds that
must be obtained externally by borrowing or by selling new stock is
Assets (P millions) Liabilities (P millions)
Cash P 50 Accounts payable P 30
Receivables 130 Accrued taxes & wages 40
Inventories 150 Mortgage bonds 130
Net fixed assets 220 Common stock 150
Retained earnings 200
A. P111.50 million. C. P65 million.
B. P165 million. D. P144 million.

63. The MNO Company believes that it can sell long-term bonds with a 6% coupon but at a price that gives a yield-to-
maturity of 9%. If such bonds are part of next year’s financing plans, which of the following should be used for
bonds in their after-tax (40%) cost-of-capital calculation?
A. 3.6% C. 4.2%
B. 5.4% D. 6%

64. Find the required rate of return for equity investors of a firm with a beta of 1.2 when the risk-free rate is 6%, the
market risk premium is 4%, and the return on the market is 10%.
A. 4.80% C. 10%
B. 6% D. 10.80%

65. Grateway Inc. has a weighted average cost of capital of 11.5 percent. Its target capital structure is 55 percent equity
and 45 percent debt. The company has sufficient retained earnings to fund the equity portion of its capital budget.
The before-tax cost of debt is 9 percent, and the company’s tax rate is 30 percent. If the expected dividend next
period (D1) is P5 and the current stock price is P45, what is the company’s growth rate?
A. 2.68% D. 6.75%
B. 3.44% E. 8.16%
C. 4.64%

66. Paulina’s Products, Inc. is considering a new piece of equipment that costs P75,000. The equipment is expected
to generate revenues before-tax cash inflows of P25,000 per year for five years. The equipment would be
depreciated using straight-line method over its five-year life. Upon retirement, the machine is expected to have
a market value of P8,000. The company considers the maximum impact of income taxes in all o f its capital
investment decisions. The company has a 35 percent income tax rate and desires an after -tax rate of return of
12 percent on its investment.
The present value of 1, end of 5 years at 12% is 0.56743 and for ordinary annuity is 3.60478.
The net present value of the equipment is:
a. P 7,042 c. P 21,248
b. P 4,539 d. P 5,453
Use the following information for the next four questions.
An organization has four investment proposals with the following costs and expected cash inflows:

Expected Cash Inflows

Cost End of year 1 End of year 2 End of year 3
A ? P10,000 P10,000 P10,000
B P20,000 P 5,000 P10,000 P15,000
C P25,000 P15,000 P10,000 P 5,000
D P30,000 P20,000 ? P20,000

67. If Project A has an internal rate of return (IRR) of 15%, then it has a cost of
a. P 8,696
b. P22.832
c. P24,869
d. P27,232

68. If the discount rate is 10%, the net present value (NPV) of Project B is
a. P 4,079
b. P 6,789
c. P 9,869
d. P39,204

69. The payback period of Project C is

a. 0 years.
b. 1 year.
c. 2 years.
d. 3 years.

70. If the discount rate is 5% and the discounted payback period of Project D is exactly two years, then the year
two cash inflow for Project D is_________.
a. P 5,890
b. P10,000
c. P12,075
d. P14,301
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