2425 INCOMING 3RD YEAR MS MOCK QUALIFYING EXAM

ANSWER KEY

1. The true economic yield produced by an asset is summarized by the asset’s:

a. Non-discounted cash flows
b. Internal rate of return
c. Net present value
d. Cost of capital
**No explanation given**
RESA 2024 MAY FINAL PB

2. Regression analysis is a statistical technique that

a. Quantifies the dependence of a given economic variable on one or more other variables
b. Transforms or normalizes key economic variables
c. Determine the historical patterns of economic variables
d. Uncovers regular patterns in regular-looking economic variables

**No explanation given**

RESA 2024 MAY FINAL PB

3. A tool that is most useful in working capital (cash) management is the:

a. Baumol Model
b. Gordon Model
c. Du Pont Model
d. Capital Asset Pricing Model

**No explanation given**

RESA 2024 MAY PREWEEK

4. As risk aversion increases

a. A firm’s beta will increase
b. A firm’s beta will decrease
c. Investor’s required rate of return will increase
d. Investor’s required rate of return will decrease

**No explanation given**

RESA 2024 MAY PREWEEK

5. The best transfer price is usually

a. A reliable market price
b. Actual cost plus a percentage markup
c. Budgeted full cost plus a percentage markup
d. Budgeted variable cost plus a percentage markup

**No explanation given**

RESA - MAY 2024 FIRST PRE - BOARD
6. If a company is operating at the break-even point, then
a. Margin of safety will be equal to zero
b. Fixed expenses will be equal to its variable expenses
c. Contribution margin will be equal to its variable expenses
d. Selling price will be equal to its variable expenses per unit

**No explanation given**

RESA 2024 OCT. 1ST PB

7. Which of the following topics is of more concern to management accounting than to cost accounting?
a. generally accepted accounting principles
b. inventory valuation
c. cost of goods sold valuation
d. impact of economic conditions on company operations

**No explanation given**

CPAR MAY 1ST PB

8. In a global economy,
a. the trade of goods and services is focused on trade between or among countries on the same continent.
b. the international movement of labor is prohibited except for multilingual persons.
c. the international flows of capital and information are common.
d. all of the above happen in a global economy.

**No explanation given**

CPAR MAY 1ST PB

9. Gross domestic product (GDP) is the

a. total amount of expenditures for consumer goods and investment for a period of time.
b. total purchases by consumers, businesses, government, and foreign entities
c. value of all final goods and services produced by the country by both domestic and foreign-owned sources.
d. value of all goods and services produced by the country by domestic firms, excluding those produced by
foreign-owned companies.
**No explanation given**
CPAR MAY 1ST PB

10. It is a sequence of economic activity in a nation’s economy that is typically characterized by four phases –
recession, recovery, growth, and decline – that repeat themselves over time.
a. Business cycle
b. Operating cycle
c. Accounting cycle
d. Life cycle

**No explanation given**

CPAR MAY 1ST PB
11. A direct cost is one that is
a. Variable with respect to the cost object.
b. Traceable to the cost object.
c. Fixed with respect to the cost object.
d. Allocated to the cost object.

**No explanation given**

CPAR MAY 1ST PB

12. If the net present value (NPV) of a capital budgeting project is positive, it would indicate that the:
a. present value divided by the initial cash outlay would be less than 100%.
b. present value (PV) of cash outflows exceeds the PV of cash inflows.
c. internal rate of return for this project is greater than the discount percentage rate used in the NPV
computation.
d. internal rate of return (IRR) is equal to the discount percentage rate used in the NPV computation.

**No explanation given**

CPAR MAY FINAL PB

13. It is the study of individuals, households and firms’ behavior in decision making and allocation of resources.
It generally applies to markets of goods and services and deals with individua land economic issues.
a. Microeconomics
b. Macroeconomics
c. International economics
d. Governmental economics

**No explanation given**

CPAR MAY FINAL PB
14. The demand curve for a product reflects which of the following?
a. The impact of prices on the amount of products offered.
b. The willingness of producers to offer a product at alternative prices.
c. The impact that price has on the amount of a product purchased.
d. The impact that price has on the amount of two related products.

**No explanation given**

CPAR MAY FINAL PB

15. When a financial manager takes action to minimize the firm’s investment in current assets, which one of
the following risks is likely to exist?
a. Accounts receivable defaults may increase.
b. Inventory spoilage may increase.
c. Inventory shortage may increase.
d. Inventory obsolescence may increase.

**No explanation given**

CPAR MAY FINAL PB
16. Concurrent with a significant downturn in economy, the sale of a company’s high-end products decreased
dramatically. Which of the following is the most likely direct cause of the decline in demand for the company’s
products?
a. The company increased the price of the products.
b. Income of market participants decreased.
c. The company reduced the price of its products.
d. Market participants’ preferences for such high-end products change.

**No explanation given**

CPAR MAY FINAL PB

17. A company wishes to raise capital in the capital markets. They file the appropriate paperwork and come to
the point where they are ready to issue new shares of stock, commonly known as in Initial Public Offering, or
IPO. The market that the organization uses to sell these new shares of stock is known as the:
a. Money market
b. Sales market
c. Secondary market
d. Primary market
**No explanation given**
CPAR MAY FINAL PB

18. Viable short-term financing options for a pharmaceutical company include all of the following except:
a. issues of preferred stock.
b. trade credit.
c. bankers' acceptances.
d. commercial paper.

**No explanation given**

CPAR MAY FINAL PB

19. If a company receives trade credit terms of 1/10 net 45, the effective annual rate (assuming that there are
365 days in a year) for foregoing the trade credit discount is closest to:
a. 10.39%.
b. 10.43%.
c. 8.11%.
d. 10.53%.
The opportunity cost of giving up a discount is: 1/99 x 365/45−10 = 10.53%
CPAR MAY FINAL PB

20. Capital markets facilitate the trading of

a. both stocks and bonds.
b. stocks, but not bonds.
c. bonds, but not stocks.
d. neither stocks nor bonds.

**No explanation given**

CPAR MAY FINAL PB
21. When a financial manager takes action to minimize the firm’s investment in current assets, which one of
the following risks is likely to exist?
a. Accounts receivable defaults may increase.
b. Inventory spoilage may increase.
c. Inventory shortage may increase.
d. Inventory obsolescence may increase.

**No explanation given**

CPAR MAY FINAL PB

ITEMS 22 AND 22 ARE BASED ON THE FOLLOWING INFORMATION:

Information relating to the current operations of a company follows:
Sales ₱120,000
Variable costs 36,000
Contribution margin ₱ 84,000
Fixed costs 70,000
Profit before taxes ₱ 1 4,000

22. If the company’s break-even point is 1,000 units, what is the company’s selling price per unit?
a. ₱120
b. ₱ 84
c. ₱100
d. ₱ 70
The break-even point is found by dividing the fixed costs by the CM ratio.
The CM ratio is: ₱84,000/₱120,000 = 70%.
Breakeven would then be: ₱70,000/.70 = ₱100,000.
Since we also know that the break-even point is defined as 1,000 units, it must follow that the unit sales price is
₱100,000/1,000 = ₱100.
CPAR 2024 OCT 1ST PB

23. What is the company’s degree of operating leverage?

a. 16.67%
b. 6
c. 1.20
d. 140
DOL = CM/Profit Before Tax = ₱84,000/₱14,000 = 6
CPAR 2024 OCT 1ST PB

24. A company's manufacturing overhead is 20% of its total conversion costs. If direct labor is ₱38,000 and if
direct materials are ₱35,000, the manufacturing overhead is:
a. ₱18,250
b. ₱ 9,500
c. ₱ 8,750
d. ₱152,000
 Solution:
FOH = 20%(Conversion Cost)
FOH = 20%(Labor + FOH)
FOH = 20%(₱38,000 + FOH)
FOH = ₱7,600 + 20%FOH
80%FOH = ₱7,600
FOH = ₱7,600/ 80%
= ₱9,500
CPAR 2024 OCT 1ST PB

For items 25 & 26

Below is an income statement for a company:
Sales ₱400,000
Variable costs 125,000
Contribution margin ₱275,000
Fixed costs 200,000
Profit before taxes ₱ 75,000

25. Based on the company’s cost and revenue structure on the income statement, what was the company’s
break-even point in pesos?
a. ₱200,000
b. ₱325,000
c. ₱300,000
d. ₱290,909
CMR = ₱275,000/₱400,000 = 68.75%
BEP in pesos = Fixed Costs/CMR = ₱200,000/68.75% = ₱290,909
CPAR 2024 OCT 1ST PB

26. What was the company’s margin of safety?

a. ₱200,000
b. ₱ 75,000 d. ₱109,091
c. ₱100,000
d. ₱109,091
Margin of Safety = Sales – BES = ₱400,000 - ₱290,909 = ₱109,091
CPAR 2024 OCT 1ST PB

27. At the break-even point, fixed costs are always

a. less than the contribution margin.
b. equal to the contribution margin.
c. more than the contribution margin.
d. more than the variable cost.
**No explanation given**
CPAR 2024 OCT 1ST PB
28. Which phrase best describes the current role of the managerial accountant?
a. Managerial accountants prepare the financial statements for an organization.
b. Managerial accountants facilitate the decision-making process within an organization.
c. Managerial accountants make the key decisions within an organization.
d. Managerial accountants are primarily information collectors.

**No explanation given**

CPAR 2024 OCT 1ST PB

29. Which of the following identifies the rate of return required by investors to compensate them for deferring
current consumption when making an investment?
a. Prime rate
b. Risk-free rate
c. Discount rate
d. Effective rate

**The risk-free rate, as the term implies, is the interest that would be charged on a borrowing that carried no
risks (e.g., default, inflation, etc.). This interest is required by lenders, not to cover risks, but to compensate the
lender for deferring the use of funds by making an investment.**
CPAR 2024 OCT. PREWEEK

30. A company is evaluating a new project using the net present value approach and a 12% hurdle rate. It has
determined that, in addition in addition to investment in plant and equipment, the project will require a ₱12,000
investment in net working capital. The project is expected to have a 5-year life, at the end of which the investment
in working capital will be recovered.
The present value of ₱1 and the future value of ₱1 factors for five years at 12% are 0.5674 and 1.7623,
respectively. In carrying out its net present value analysis, how should the company treat the working capital
requirement both when it is made at the beginning of the project and at the end of the project?
a. Ignore in both at the beginning and end of the projects.
b. Cash outflow of ₱12,000 at the beginning of the project and ignore at the end of the project.
c. Cash outflow of ₱12,000 at the beginning of the project and cash inflow of ₱12,000 at the end of the project.
d. Cash outflow of ₱12,000 at the beginning of the project and cash inflow of ₱6,809 at the end of the project.

Solution
12,000 × .5674 = P 6,809
CPAR 2024 OCT PREWEEK

Aiah, Inc. sells a single product for P 40 per unit, which it purchases for P 20. The salespeople receive a salary
plus a commission of 5% of sales. Last year the organization’s net income (after taxes) was P 100,800. The
organization is subject to an income tax rate of 30%. The fixed costs of the organization are:
Advertising P 124,000
Rent 60,000
Salaries 180,000
Other fixed costs 32,000
Total P 396,000
31. What is the breakeven point in unit sales for Aiah?
A. 8,800 units
B. 18,000 units
C. 19,800 units
D. 22,000 units
Solution:
Breakeven Point in Units: 396,000 ÷ (40 – 20 – 2*) *Commission: 5% (40)
RESA - MAY 2024 PREWEEK

32. Under income approach, which of the following are included in computing the Gross Domestic Product?
A. Wages, Income of Foreigners, Profits, and Rent
B. Interest, Exports, Wages, and Profits
C. Losses, Depreciation, Indirect Business Taxes and Government spending
D. Rent, Wages, Investment Income and Realized gain on sale
**No explanation given.**
ICARE - DECEMBER 2024 LAST MINUTE TIPS

33. A firm’s optimal capital structure is

A. the debt-equity ratio that results in the minimum possible weighted average cost of capital
B. Based on 40% debt and 60% equity
C. Based on debt-equity ratio of 50%
D. When the cost of equity is minimum
**No explanation given.**
RESA - MAY 2024 FINAL PRE-BOARD

34. When variable costing is used, fixed manufacturing overhead is recognized as an expense when the
A. cost is incurred
B. product is completed
C. product is sold
D. product is inventoried
**No explanation given.**
ICARE - OCTOBER 2024 1st PB

35. A very liquid company sells inventory for cash to a customer, at a selling price which is below the cost of the
inventory items. How will this transaction affect the current ratio and the quick ratio immediately after the
transaction?
A. increase, increase
B. increase, decrease
C. decrease, increase
D. decrease, decrease
**No explanation given.**
RESA - MAY 2024 FINAL PB
36. Solantra Company is investing in a machine with a three-year life. The machine is expected to reduce annual
cash operating costs by ₱30,000 in each of the first two years and by ₱20,000 in year 3. Present value of an
annuity of ₱1 at 14% are:
Period 1 0.88
2 1.65
3 2.32

Using a 14% cost of capital, what is the present value of these future savings?
A. ₱59,600
B. ₱60,800
C. ₱62,900
D. ₱69,500
Solution:
Periods 1 and 2 (₱30,000 x 1.65) ₱49,500
Period 3 (₱20,000 x <2.32 - 1.65>) 13,400
Total present value ₱62,900
CPAR - MAY 2024 PREWEEK

37. The goal of working capital management is to:

a. Pay off short-term debts
b. Balance current assets against current liabilities
c. Achieve a balance between risk and return to maximize the firm’s value
d. Achieve a balance between short-term and long-term assets to achieve the firm’s overall goals
**No explanation given**
RESA 2024 OCT PREWEEK
38. If a firm increases its current assets relative to total assets,
a. It reduces return and risk
b. It increases return and risk
c. It increases return but reduces risk
d. It reduces return but increases risk
**No explanation given**
RESA 2024 OCT PREWEEK
39. Which money market security is most often held as a substitute for cash?
a. Treasury bills
b. Common stock
c. Gold
d. AAA corporate bonds
**No explanation given**
RESA 2024 OCT PREWEEK

40. JYP Company has P 5,000,000 of average inventory and sales of P 30,000,000. Using a 365-day year,
calculate the firm’s inventory conversion period or age in inventory.
a. 30.25 days
b. 45.00 days
c. 60.83 days
d. 72.44 days
Solution:
Inventory turnover: 30 M ÷ 5 M = 6 times Age of inventory: 365 ÷ 6
RESA 2024 OCT PREWEEK
41. Which of the following will cause a shift in the supply curve of a product?
a. Changes in the price of the product.
b. Changes in production taxes.
c. Changes in consumer tastes.
d. Changes in the number of buyers in the market.

**No explanation given**

CPAR 2024 OCT 1ST PB

42. Momo Company buys on terms 2/10, net 30 but generally does not pay until 40 days after the invoice date.
Its purchases total P2,160,000 per year. Assuming 360 days a year, what is the amount of non-free trade credit
used by the company on the average each year?
a. P 240,000
b. P 180,000
c. P 120,000
d. P 60,000
NOTE: FREE trade credit refers to payments made within the discount period while NON-FREE trade credit
refers to payment made after the discount period, thereby foregoing discounts or incurring financing costs
(hence, non-free)
Solution: (2,160,000 ÷ 360) x (40 – 10)
RESA 2024 OCT PREWEEK

43. Chaeyong Traders borrowed P 30,000 at an annual percentage rate (APR) of 10%. The loan called for a
compensating balance of 20%. What is the effective interest rate (EAR) on the loan?
a. 12.5%
b. 11.1%
c. 10%
d. 9.1%
Solution:
EAR = 10% ÷ (100% - 20%)
Alternatively: EAR = 10% (30,000) ÷ 30,000 (80%) = 3,000 ÷ 24,000

44. In capital markets, the primary market is concerned with

a. New issues of bond and stock securities
b. Exchanges of existing bond and stock securities
c. Sales of forward or future commodities contracts
d. New issues of bond and stock securities and exchanges of existing bond and stock securities

**No explanation given**

RESA 2024 MAY PREWEEK

45. The market for outstanding, listed common stock is called

a. Primary market
b. New issue market
c. Secondary market
d. Over-the-counter market
**No explanation given**
RESA 2024 MAY PREWEEK
46. The payback method assumes that all cash inflows are reinvested to yield a return equal to
a. The discount rate
b. The hurdle rate
c. The internal rate of return
d. Zero
**No explanation given**
RESA 2024 MAY PREWEEK

47. Financial management

a. Recognizes funds on an accrual basis
b. Involves the design and delivery of advice and financial products
c. Involves tasks such budgeting, financial forecasting, cash management and funds procurement
d. Devotes majority of its attention to the collection and presentation of business data and financial information

**No explanation given**

RESA 2024 OCT 1ST PB

For the following 2 questions

Olympics Company presented the following data pertaining to the 2024 operations of its lone branch in Project
8, Quezon City:
Sales P 1,200,000
Variable Costs (480,000)
Contribution Margin P 720,000
Fixed Costs (600,000)
Profit P 120,000
48. If sales increase by 5%, then profit will increase by:
a. 20%
b. 25%
c. 30%
d. 35%
Solution
DOL or OLF: P 720,000 + P 120,000 = 6 times
Increase in profit: 5% (6 times)
RESA 2024 OCT 1ST PB

49. If assets turnover is 2.5 times, then return on investment (ROI) shall be:
a. 4%
b. 25%
c. 40%
d. The exact ROI cannot be determined from the given information
Solution
Margin: 120,000 ÷ 1,200,000 = 10%
ROI: 10% (2.5)
RESA 2O24 OCT 1ST PB
50. Field Company has set various goals, and management is now taking appropriate action to ensure that the
firm achieves these goals. One such action is to reduce outlays for overhead, which have exceeded budgeted
amounts. Which of the following functions best describes this process?
a. Decision making
b. Organizing
c. Controlling
d. Planning
** No explanation given**
RESA 2024 OCT 1ST PB

51. Economists use the term “recession” to refer to

a. any slowdown in aggregate economic activity
b. zero growth in aggregate real income
c. at least two consecutive quarterly declines in real GDP
d. a decline in real GDP that lasts at least one month
**No explanation given**
ICARE 2024 DEC. Last Minute Tips
52. A decrease in demand is represented by
a. A shift inward of the entire demand curve.
b. A shift outward of the entire demand curve.
c. A movement along the demand curve in a northwesterly direction.
d. A movement along the demand curve in a southeasterly direction.

**No explanation given**

ICARE 2024 DEC. Last Minute Tips

53. Under income approach, which of the following are included in computing the Gross Domestic Product?
a. Wages, Income of Foreigners, Profits, and Rent
b. Interest, Exports, Wages, and Profits
c. Losses, Depreciation, Indirect Business Taxes and Government spending
d. Rent, Wages, Investment Income and Realized gain on sale

**No explanation given**

ICARE 2024 DEC. Last Minute Tips
54. Which of the following is the primary goal of financialmanagement?
a. Maximizing revenue
b. Maximizing shareholder wealth
c. Reducing operating costs
d. Maximizing profits at any cost
**No explanation given**
ICARE 2024 DEC. Last Minute Tips P2

55. Which of the following statements is false regarding financial management?

a. Financial management is focused on maximizing shareholder wealth.
b. The primary function of financial management is to manage a firm's short-term cash flow.
c. Financial managers are responsible for making decisions related to investments, financing, and dividends.
d. Financial management involves risk assessment and the management of financial risks.
**No explanation given**
ICARE 2024 DEC. Last Minute Tips P2
56. Doe Ter Tea Inc. turns 200 milk tea a day at a cost of P250 per milk tea. It takes 1.80 days to convert
materials into milk tea. The company’s usual credit terms extended to its customers is 3 days, and the firm
generally pays its suppliers in 2 days. The selling price of the milk tea is P300. If the foregoing cycles are
constant, what amount of working capital must the company finance?
a. 140,000
b. 240,000
c. 170,000
d. 900,000
Solution
200 × 250 = 50, 000
CCC: 1.80 + 3 - 2 = 2.80
2.80 × 50,000 = 140,000
ICARE 2024 DEC. Last Minute Tips P2

57. With credit terms of 3/8, n30, what is the customer’s payment decision date?
a. Three days after the invoice is received
b. The 8th day is the customer’s decision
c. Anytime during the period 8th to the 30th
d. The 30th day is the primary decision date.
**No explanation given**
ICARE 2024 DEC. Last Minute Tips P2

58. Although debt financing is usually the cheapest component of capital, it cannot be used to excess because
a. the interest rates may change
b. the firm’s stock price will increase and raise the cost of equity financing
c. the financial risk of the firm may increase and thus drive up the cost of all sources of financing.
c. None of the above
**No explanation given**
ICARE 2024 DEC. Last Minute Tips P2
For the following 2 questions
Soda Company is evaluating a 5-year investment project that requires a capital budget of P 720,000 and
generates equal amount of annual net cash flows.

59. If the payback period is 2.4 years, then the annual net cash flows must be:
a. P 345,600
b. P 300,000
c. P 144,000
d. Cannot be determined from the given information
Solution
PB period= Net investment ÷ Net cash flow
2.4 year = 720,000 ÷ Net cash flow
Net cash flow = 720,000 ÷ 2.4 years
RESA 2024 OCT FINAL PB
60. If the net present value at 10% cost of capital is computed as P 38,200, then the annual net cash flows must
be closest to:
a. P 180,000
b. P 190,000
c. P 200,000
d. P 210,000
Solution
PV annuity factor (5 years at 10%): 3.791
NPV = 38,200 = NCF (3.791) - 720,000
NCF = 758,200 ÷ 3.791
RESA 2024 OCT FINAL PB
61. A company wanting to allocate its idle funds in the money market may invest in
a. Preferred shares
b. Commercial papers
c. BSP treasury bonds
d. 2-year time deposits
**No explanation given**
RESA 2024 OCT FINAL PB

62. Royal Corporation has two producing centers, (A and B) Division A has a variable cost of P 12 for its products
and a total fixed cost of P 120,000. Division A also has idle capacity for up to 50,000 units per month. Division B
would like to purchase 20,000 units of Division A's products per month, but is unable to convince Division A to
transfer units to Division B at P 16 per unit. Division A has consistently argued that the market price of P 24 is
nonnegotiable. What is A's opportunity cost of not transferring units to B?
a. P 24
b. P 12
c. P 8
d. P 4
Solution
Division A opportunity cost: 16 - 12
RESA 2024 OCT FINAL PB
63. A rapid increase in population will result in
a. A decrease in both real GDP and per capita GDP
b. An increase in both real GDP and per capita GDP
c. A decrease in real GDP but an increase in per capita GDP
d. An increase in real GDP but a decrease in per capita GDP

**No explanation given**

RESA 2024 OCT FINAL PB

64. At a given sales volume in the CVP graph, the vertical distance between the fixed cost line and the total cost
line represents:
a. Variable cost
b. Semi-variable cost
c. Profit or loss at that volume
d. No meaningful or significant amount

**No explanation given**

RESA 2024 OCT FINAL PB
65. Mirinda Company sells a single product at P 14 per unit. The firm's income statement revealed unit sales of
80,000, variable costs of P 800,000, and fixed costs of P 560,000. Management believes that a P 3 drop in
selling price will boost unit sales volume by 20%. Which of the following correctly depicts how
these two changes will affect the company's break-even point?

Drop in Sales Price Increase in Sales Volume

a. Increase Increase
b. Increase Decrease
c. Increase No effect
d. Decrease Increase

**No explanation given**

RESA 2024 OCT FINAL PB

66. Which transaction causes an increase in a current ratio of 2.0 at present?

I. Receives cash on account
II. Sells goods on account at a profit
III. Makes a payment on account
IV. Purchases inventory on account
a. II and IV
b. II and III
c. II, III and IV
d. I, II, III and IV
**No explanation given**
RESA 2024 OCT FINAL PB

Fanta Company has just acquired a large account and needs to increase its working capital by P 100,000. The
controller of the company has identified the following two alternative sources of funds:
➢ Alternative A: Borrow P 110,000 from a bank at 12% interest. A 9% compensating balance would be required.
➢ Alternative B: Issue P 110,000 of 6-month commercial paper to net P 100,000. (New paper would be issued
every six months.)

67. What is the annual effective interest rate cost of Alternative A?

a. 10.9%
b. 12.1%
c. 13.2%
d. 15.2%
Solution
EAR: 12% ÷ (100% - 9%)
RESA 2024 OCT FINAL PB

68. What is the annual effective interest rate cost of Alternative B?

a. 9.1%
b. 10%
c. 18.2%
d. 20%
Solution
EAR: (10,000÷ 100,000) × (360 ÷ 180)
RESA 2024 OCT FINAL PB
Lemon Dou Company is considering replacing a machine that has the following characteristics.
Book Value P 100,000
Remaining useful life 5 years
Annual straight-line depreciation ???
Current market value P 60,000
The replacement machine would cost P 150,000, have a five-year life, and save P50,000 per year in cash
operating costs. It would be depreciated using the straight-line method. The tax rate is 40%.

69. The net investment required to replace the existing machine is:
a. P 134,000
b. P 90,000
c. P 74,000
d. P 66,000
Solution
Net investment= Cost - Savings
150,000- [60,000 - 40% (100,000 - 60,000)]

70. The increase in annual net cash flows if the company replaces the machine is:
a. P 30,000
b. P 34,000
c. P 36,000
d. P 42,000
Solution
60% (50,000) + 40% (30,000* - 20,000**)
*New Depreciation: 150,000 ÷ 5 years
**Old Depreciation: 100,000 ÷ 5 years
RESA 2024 OCT FINAL PB