Project Thor Requires an Initial Investment of $50,000 and Is

question 38

Multiple Choice

Project Thor requires an initial investment of $50,000 and is expected to offer cash flows of $20,000 a year for the following three years. This project will be profitable, so long as the
Discount rate is

• A)less than the cost of capital.
• B)greater than the risk-free rate.
• C)less than 9.7%.
• D)greater than 10%.

Calculate the proportional allocation of expenses to different departments based on applicable allocation bases.

Identify which expenses are considered direct or indirect in the context of departmental accounting.

Comprehend the impact of expense allocation on net income calculation for a department.

Understand the role of gross sales in the allocation of indirect expenses.

---

Definitions:

Output Increased

A situation where the production of goods or services in an economy rises.

Purely Competitive Market

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information, leading to firms being price takers.

Short Run

A time period in which at least one factor of production is fixed, limiting the ability of a firm to adjust its output.

Automatic Market Adjustments

The self-regulating nature of the marketplace that responds to supply and demand changes to reach equilibrium without outside intervention.