AICPA Exam CPA-Business Topic 3 Question 104 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 104
Topic #: 3

The Keego Company is planning a $200,000 equipment investment, which has an estimated five-year life with no estimated salvage value. The company has projected the following annual cash flows for the investment.

The net present value for the investment is:

A$18,800

B$196,200

C$(3,800)

D$91,743

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. The most logical sequence in planning and controlling capital expenditures is to begin with identifying capital addition projects and other capital needs.

Choice 'a' is incorrect. Analyzing capital addition proposals omits other capital needs.

Choice 'b' is incorrect. Analyzing and evaluating all promising alternatives is beyond the scope of planning and controlling capital expenditures.

Choice 'd' is incorrect. Developing capital budgets is the same as planning and controlling capital expenditures.

by Adelina at Dec 06, 2024, 08:55 PM

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25 days ago

I think the answer is B) $196,200.

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