# Quiz 9: Perform the Analysis: Prescriptive Analytics

Business

Q 1Q 1

An accounting rate of return is the percentage of return expected on an asset compared to the initial investment cost.

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True False

True

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True False

False

Q 3Q 3

Using three different possible interest rates to evaluate their possible impact on the outcomes of investments is called sensitivity analysis.

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True False

True

Q 4Q 4

Future modelling is a representation of the financial outcomes resulting from a decision or future event.

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True False

Q 5Q 5

The process of changing the values in various input cells to see how they might affect the output is called foregone costs.

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True False

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True False

Q 7Q 7

Prescriptive analytics will often build upon descriptive, diagnostic, or predictive analytics.

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True False

Q 8Q 8

Whether the investment returns arrive in year 1 versus year 2 will not make a difference on the calculation of net present value.

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True False

Q 9Q 9

Whether the investment returns arrive in year 1 versus year 2 will make a difference on the calculation of internal rate of return.

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True False

Q 10Q 10

This is the correct calculation of net present value a new piece of equipment that is expected to cost $200,000 at the time of purchase (Year 0) and returns $150,000 per year for three years, and a cost of capital of 10%.

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True False

Q 11Q 11

A series (such as monthly or annually) of fixed payments is called a(n) __________.
A) annuity
B) lump-sum payment
C) sunk costs
D) capital payment

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Multiple Choice

Q 12Q 12

The interest rate calculated to the point where the present value of cash inflows is equal to the present value of cash outflows is called __________.
A) net present value
B) internal rate of return
C) capital budgeting
D) marginal analysis

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Multiple Choice

Q 13Q 13

Scenario analysis is __________.
A) an analysis of future events performed by assessing the probability of those events and the potential outcomes
B) the evaluation of the outcomes based on uncertainty regarding the inputs
C) the evaluation of the change in profit associated with the cost or benefit of the next unit
D) analysis performed to investigate the underlying cause

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Multiple Choice

Q 14Q 14

__________ analytics identifies the best possible option given constraints or changing conditions.
A) Predictive
B) Descriptive
C) Prescriptive
D) Forecasting

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Multiple Choice

Q 15Q 15

Prescriptive analytics helps identify the best decision based on constraints or changing __________.
A) opportunities
B) forecasts
C) challenges
D) conditions

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Multiple Choice

Q 16Q 16

An objective of financial accounting is to help investors and other users in assessing the amounts, __________, and __________of future cash cash-flows.
A) timing, risk
B) totals, timing
C) timing, uncertainty
D) totals, risk

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Multiple Choice

Q 17Q 17

Cisco, a provider of modems and routers has decided it is more profitable to outsource its production than to make it themselves. To decide this, they have performed __________.
A) sensitivity analysis
B) make-or-buy analysis
C) scenario analysis
D) financial modeling

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Multiple Choice

Q 18Q 18

The __________ is the interest rate that makes the present value of cash inflows just equal to the present value of cash outflows.
A) net present value
B) internal rate of return
C) capital budget
D) marginal analysis

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Multiple Choice

Q 19Q 19

The decision of which major expenditures and projects a company will invest in is traditionally called __________.
A) cash flow analysis
B) net present value analysis
C) internal rate of return
D) capital budgeting

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Multiple Choice

Q 20Q 20

What is the internal rate of return for a $33,000 investment (−33,000 at year zero) and cash inflows of $10,000 per year for years 1 through 4?
A) 8.16%
B) 21.21%
C) 7.18%
D) 2.39%

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Multiple Choice

Q 21Q 21

What is the net present value for a $33,000 investment (−33,000 at year zero) and cash inflows of $10,000 per year for years 1 through 4, using a 4% discount rate?
A) $3,172.07
B) −$3,172.07
C) $1,312.66
D) −$1,411.54

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Multiple Choice

Q 22Q 22

What is the Excel formula to compute the internal rate of return for a $32,000 investment and cash inflows of $10,000 per year for years 1 through 4?
A) =IRR(33000,−10000,−10000,−10000,−10000)
B) =IRR(−33000,10000,10000,10000,10000)
C) =IRR(−10000,−10000,−10000,−10000,−33000)
D) =IRR(10000,10000,10000,10000,−33000)

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Multiple Choice

Q 23Q 23

What is the Excel formula to compute the net present value for an initial $53,000 investment and cash inflows of $17,000 per year for years 1 through 4 with a 10% cost of capital?
A) =NPV(0.1,53000,−17000,−17000,−17000,−17000)
B) =NPV(0.1, 17000,17000,17000,17000,−53000)
C) =NPV(−53000,17000,17000,17000,17000)
D) =NPV(0.1,−53000,17000,17000,17000,17000)

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Multiple Choice

Q 24Q 24

In make-or-buy analysis, which of the following is not a key input to the decision?
A) avoidable fixed costs
B) avoidable variable costs
C) cost by the contract manufacturer
D) the sales price of the product being manufactured

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Multiple Choice

Q 25Q 25

All other things being equal, we would not choose the investment with the __________ accounting rate of return.
A) lowest
B) highest
C) equivalent
D) most reasonable

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Multiple Choice

Q 26Q 26

The point at which it no longer matters which alternative is chosen since the outcome is the same under either alternative is called the __________.
A) tipping point
B) point of indifference
C) decision point
D) point of equality

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Multiple Choice

Q 27Q 27

The technique used in management accounting to determine the change in profit associated with the cost or benefit of the next (or the marginal) unit is called __________.
A) scenario analysis
B) goal-seek analysis
C) marginal analysis
D) predictive analytics

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Multiple Choice

Q 28Q 28

An example of goal-seek analysis is determining __________.
A) the amount of sales to break even
B) the accounting rate of return
C) the net present value
D) the internal rate of return

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Multiple Choice

Q 29Q 29

__________ is the cost of available funds for a company, which acts as a hurdle rate that the company must overcome to create value.
A) The cost of capital
B) The required rate of return
C) The internal rate of return
D) The cost of funding

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Multiple Choice

Q 30Q 30

Which component of the AMPS model does prescriptive analytics fall under?
A) Ask the Question
B) Master the Data
C) Perform the Analysis
D) Share the Story

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Multiple Choice

Q 31Q 31

Determining the best course of action under nine possible tax rate scenarios is an example of:
A) marginal analysis
B) scenario analysis
C) sensitivity analysis
D) goal-seek analysis

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Multiple Choice

Q 32Q 32

All of the following are types of prescriptive analytics except:
A) What-if analysis
B) Times series analysis
C) Sensitivity analysis
D) Goal-seek analysis

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Multiple Choice

Q 33Q 33

All of the following are types of prescriptive analytics except:
A) Goal-seek analysis
B) Regression analysis
C) Marginal analysis
D) Cash flow analysis

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Multiple Choice

Q 34Q 34

What is the internal rate of return for a $55,000 investment (−$55,000 in year zero) and cash inflows of $20,000 per year for years 1 through 4?
A) 16.88%
B) −16.88%
C) 45.4%
D) −45.4%

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Multiple Choice

Q 35Q 35

What is the net present value for a $55,000 investment (−$55,000 in year zero) and cash inflows of $20,000 per year for years 1 through 4, using a 4% discount rate?
A) $16,921.06
B) $25,000
C) −$25,000
D) −$16,921.06

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Multiple Choice

Q 36Q 36

The Excel formula to compute the net present value of cash flows for a $55,000 investment (−55,000 at year zero) and cash inflows of $20,000 per year for years 1 through 4, using a 4% discount rate is:
A) =NPV(0.04,−55000,20000,20000,20000,20000)
B) =NPV(−55000,20000,20000,20000,20000,0.04)
C) =NPV(0.04, 55000,−20000,−20000,−20000,−20000)
D) =NPV(55000,−20000,−20000,−20000,−20000,0.04)

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Multiple Choice

Q 37Q 37

Calculate the annual car payment for a car loan of $20,000 at 5% interest rate over five years.
A) $4,619.50
B) $4,000
C) $4,520
D) $419.32

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Multiple Choice

Q 38Q 38

The Excel formula to compute the annual payment for a car loan of $30,000 at 5% interest rate over five years is:
A) =PMT(5,0.05,30000)
B) =PMT(30000, 0.05,5)
C) =PMT(0.05,60,30000)
D) =PMT(0.05,5,30000)

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Multiple Choice

Q 39Q 39

Marginal analysis __________ sunk costs (past spending that cannot be recovered).
A) incorporates
B) ignores
C) requires
D) analyzes

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Multiple Choice

Q 40Q 40

Determining the maximum mortgage loan you can afford given your income is an example of __________.
A) scenario analysis
B) goal-seek analysis
C) marginal analysis
D) cash flow analysis

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Multiple Choice

Q 41Q 41

Which of the following does not incorporate the time value of money in its analysis?
A) Net present value
B) Internal rate of return
C) Accounting rate of return
D) Present value of cash outflows

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Multiple Choice

Q 42Q 42

Which of the following incorporates the time value of money in its analysis?
A) Payback period
B) Return on assets
C) Internal rate of return
D) Accounting rate of return

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Multiple Choice

Q 43Q 43

Changes in consumer preferences, tax laws, interest rates, levels of risk, exchange rates, demand for employees and their expertise, etc. are all conditions a company regularly face. Predicting and addressing these changing conditions requires what kind of analytics?
A) Descriptive
B) Diagnostic
C) Predictive
D) Prescriptive

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Multiple Choice

Q 44Q 44

Prescriptive analytics may use __________ as a tool to help perform the analysis.
A) uncovering patterns
B) finding outliers
C) regression
D) sensitivity analysis

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Multiple Choice

Q 45Q 45

Goal seek analysis uses the __________ to find the __________.
A) actual output; actual input
B) actual input; actual output
C) desired output; required input
D) desired input; required output

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Multiple Choice

Q 46Q 46

In any Excel functions that use rate (e.g. PMT, IRR, NPV), the correct way to enter a monthly rate when the annual interest rate is 4 percent is __________.
A) 0.04
B) 0.04/12
C) 4
D) 4/12

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Multiple Choice

Q 47Q 47

In any Excel functions that uses NPER for term, (e.g. PMT functions is =PMT(rate, NPER,FV, PV), the correct way to enter a 30 year term to compute monthly payments is __________.
A) 30
B) 30×12
C) (30/12)/365
D) (30/12)×365

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Multiple Choice