IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 841:

  Kore Industries is analyzing a capital investment proposal for new equipment to produce a product over the next 8 years. The analyst is attempting to determine the appropriate "end-of-life cash flows for the analysis. At the end of 8 years, the equipment must be removed from the plant and will have a net book value of zero, a tax basis of $75,000, a cost to remove of $40,000. and scrap salvage value of $10,000. Kore's effective tax rate is 40%. Valiant is the appropriate endow-life cash flow related to these items that should be used in the analysis?

  A. $45,000
  B. $27,000
  C. $12,000
  D. $(18,000)
  C. $12,000

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  Explanation

  The tax basis of $75,000 and the $40,000 cost to remove can be written off. However, the

  - $10,000 scrap value is a cash inflow. Thus, the taxable loss is $105,000 ($75,000 loss on disposal + $40,000 expense to remove --$10,000 of inflows). At a 40% tax rate, the $ 105. 000 loss will produce a tax savings (inflow) of $42,000. The final cash flows will consist of an outflow of $40,000 (cost to remove) and inflows of $10,000 (scrap) and $42,000 (tax savings), or a net inflow of $12,000.

• Question 842:

  The NPV of a project has been calculated to be $215000. Which one of the following changes in assumptions would decrease the NPV?

  A. Decrease the estimated effective income tax rate.
  B. Decrease the initial investment amount.
  C. Extend the project life and associated cash inflows.
  D. Increase the discount rate.
  D. Increase the discount rate.

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  Explanation

  An increase in the discount rate would lower the net present value, as would a decrease in cash flows or an increase in the initial investment.

• Question 843:

  The process of developing plans for a company's expected operations and controlling the operations to help carry out those plans is

  A. Preparing a period budget
  B. Preparing a master budget
  C. Budgetary control
  D. Participative budgeting
  C. Budgetary control

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  Explanation

  The budget has the same structure as the organization itself. The complete budget is made up of a hierarchy of smaller budgets, each representing the plan of a division, department, or other unit in the organizational structure. Successful budgeting requires completion of a plan that states organizational goals before the budgeting process. Prevention and detection of deviations from the budget are the control purposes of budgets.

• Question 844:

  Which of the following would decrease unit contribution margin the most?

  A. A 15% decrease in selling price.
  B. A 15% increase invariable expenses.
  C. A 15% decrease in variable expenses.
  D. A 15% decrease in fixed expenses.
  A. A 15% decrease in selling price.

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  Explanation

• Question 845:

  A company wishes to price a call option written on a nod Mend. paying stock. The current stock pence is $50, the exercise price is $4$. the ask-.free interest rate is 5. 0%, the option expires in 1 year, and the cumulative probabilities used to calculate the present values of the final stock price and the exercise price are .65 and 58. respectively, The company uses the 8lack-Scholes Option Pricing Model. It e( is 9515, the current value of the call option is

  A. $6. 02
  B. $46
  C. $402
  D. $200
  A. $6. 02

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  Explanation

• Question 846:

  Which one of the graphs depicts the demand curve for presage goods?

  

  A. Option A
  B. Option B
  C. Option C
  D. Option D
  C. Option C

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  Explanation

  Over some intermediate range of prices, the reaction to a price increase (or prestige goods is an increase, not a decrease, in the quantity demanded. Within this range, the demand curve is upward sloping. The reason is that consumers interpret the higher price to indicate a better or more desirable product. Above some price level, the relation between price and quantity demanded will again become negatively sloped.

• Question 847:

  A firm that often factors its accounts receivable has an agreement with its finance company that requires the firm to maintain a 6% reserve and charges 1% commission on the amount of receivables. The net proceeds would be further reduced by an annual interest charge of 10% on the monies advanced. Assuming a 360-day year, what amount of cash (rounded to the nearest dollar) will the firm receive from the finance company at the time a $100,000 account that is due in 90 days is turned over to the finance company?

  A. $93,000
  B. $90,000
  C. $83,700
  D. $90,675
  D. $90,675

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  Explanation

• Question 848:

  Oradell Company sells its single product at a price of $60 per unit and incurs the following van able costs per unit of product: Oradell's annual fixed costs are $880.000, and Oradell is subject to a 30% income tax rate. If prime costs increased by 20% and all other values remained the same. Oradell Company's contribution margin (to the nearest whole percent) is?

  

  A. 30
  B. 76
  C. 20
  D. 24
  D. 24

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  Explanation

• Question 849:

  Contracts to hedge risk by exchange cash flows include

  Interest-Rate Currency Swaps Swaps

  A. Yes Yes
  B. Yes No
  C. No Yes
  D. No No
  A. Yes Yes

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  Explanation

  Swaps are contracts to hedge risk by exchanging cash flows. In an interest-rate swap, one firm exchanges its fixed interest and principal payments for a series of payments based on a floating rate. If a firm has debt with fixed charges, but its revenues fluctuate with interest rates, it may prefer to swap for cash outflows based on a floating rate. The advantage is that revenues and the amounts of debt service will then move in the same direction, and interest-rate risk will be reduced. A currency swap is an exchange of an obligation to pay out cash flows denominated in one currency for an obligation to pay in another. For example, a U.S. firm with revenues in francs has to pay suppliers and workers in dollars, not francs. To minimize exchange-rate risk, it might agree to exchange francs for dollars held by a firm needs francs. The exchange rate will be an average of the rates expected over the life of the agreement.

• Question 850:

  Which form of business market segmentation may be determined by customer technology?

  A. Demographic
  B. Purchasing
  C. Operational
  D. Situational
  C. Operational

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  Explanation

  Operational segmentation is determined by the element(s) of customer technology that the firm wants to emphasize, the degree of customer usage (for example, from nonusers to heavy users), or customers' service (from few to many).