1) A cost center
a.incurs expenses, earns revenue, and is evaluated using return on investment.
b.needs no managerial control or supervision.
c.should be eliminated to increase profit.
d.incurs expenses and earns no revenue.
2) Which of the following statements is false? An investment center
a.may develop its own long-term investment strategy.
b.is responsible for revenues but not expenses.
c.has many of the characteristics of an independent business.
d.may purchase long-term assets.
3) LINK, Inc. has a margin of 3.5 % and a turnover of 4. What is LINK's return on investment?
a.10%
b.14%
c. 88%
d.7.5%
4) Which of the following is the approximate internal rate of return for an investment that costs $33,900 and provides a $6,000 annuity for 10 years?
a.6%
b.10%
c.8%
d.12%
5) XYZ Company has an opportunity to purchase an asset that will cost the company $60,000. The asset is expected to add $12,000 per year to the company's net income. Assuming the asset has a 5-year useful life and a zero salvage value, the unadjusted rate of return based on the average investment will be
a.40%.
b.20%.
c.60%.
d.50%.