# Quiz 12: Capital Budgeting Decisions

Business

Q 1Q 1

In the payback method, depreciation is added back to net operating income when computing the annual net cash flow.

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True False

True

Q 2Q 2

When a company is cash poor, a project with a short payback period but a low rate of return may be preferred to a project with a long payback period and a high rate of return.

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True False

True

Q 3Q 3

A shorter payback period does not necessarily mean that one investment is more desirable than another.

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True False

True

Q 4Q 4

In calculating the payback period where new equipment is replacing old equipment, any salvage value to be received on disposal of the old equipment should be deducted from the cost of the new equipment.

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True False

Q 5Q 5

The payback method is most appropriate for projects whose cash flows do not extend far into the future.

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True False

Q 6Q 6

The required rate of return is the maximum rate of return that an investment project must yield to the acceptable.

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True False

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True False

Q 8Q 8

Discounted cash flow techniques automatically take into account recovery of the initial investment.

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True False

Q 9Q 9

When discounted cash flow methods of capital budgeting are used, the working capital required for a project is ordinarily counted as a cash outflow at the beginning of the project and as a cash inflow at the end of the project.

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True False

Q 10Q 10

The net present value method assumes that cash flows from a project are immediately reinvested at a rate of return equal to the internal rate of return.

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True False

Q 11Q 11

Neither the net present value method nor the internal rate of return method can be used as a screening tool in capital budgeting decisions.

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True False

Q 12Q 12

If the internal rate of return is less than the required rate of return for a project, then the net present value of that project is positive.

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True False

Q 13Q 13

An investment project with a project profitability index of 0.04 has an internal rate of return that is less than the discount rate.

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True False

Q 14Q 14

The internal rate of return is the rate of return of an investment project over its useful life.

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True False

Q 15Q 15

When the net cash inflow is the same every year for a project after the initial investment, the internal rate of return of a project can be determined by dividing the initial investment required in the project by the annual net cash inflow.This computation yields a factor that can be looked up in a table of present values of annuities to find the internal rate of return.

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True False

Q 16Q 16

The internal rate of return is computed by finding the discount rate that equates the present value of a project's cash outflows with the present value of its cash inflows.

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True False

Q 17Q 17

The internal rate of return method assumes that the cash flows generated by the project are immediately reinvested elsewhere at a rate of return that equals the company's cost of capital.

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True False

Q 18Q 18

An increase in the expected salvage value at the end of a capital budgeting project will increase the internal rate of return for that project.

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True False

Q 19Q 19

The minimum required rate of return is the discount rate that makes the net present value of the project equal to zero.

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True False

Q 20Q 20

The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project.

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True False

Q 21Q 21

If the salvage value of equipment at the end of a project is highly uncertain, the salvage value should be ignored in capital budgeting decisions..

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True False

Q 22Q 22

In preference decisions, the profitability index and internal rate of return methods will rank projects in the same order of preference.

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True False

Q 23Q 23

When the internal rate of return method is used to rank investment proposals, the higher the internal rate of return, the more desirable the investment.

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True False

Q 24Q 24

If investment funds are limited, the net present value of one project should not be compared directly to the net present value of another project unless the initial investments in these projects are equal.

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True False

Q 25Q 25

In calculating the "investment required" for the project profitability index, the amount invested should not be reduced by any salvage recovered from the sale of old equipment.

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True False

Q 26Q 26

When computing the project profitability index of an investment project, the investment required should exclude any investment made in working capital at the beginning of the project.

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True False

Q 27Q 27

The simple rate of return focuses on cash flows rather than on accounting net operating income.

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True False

Q 28Q 28

The simple rate of return is computed by dividing the annual net operating income generated by a project by the initial investment in the project.

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True False

Q 29Q 29

Amster Corporation has not yet decided on the required rate of return to use in its capital budgeting.This lack of information will prevent Amster from calculating a project's:

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Multiple Choice

Q 30Q 30

Rennin Dairy Corporation is considering a plant expansion decision that has an estimated useful life of 20 years.This project has an internal rate of return of 15% and a payback period of 9.6 years.How would a decrease in the expected salvage value from this project in 20 years affect the following for this project?

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Multiple Choice

Q 31Q 31

The project profitability index and the internal rate of return:
A)will always result in the same preference ranking for investment projects.
B)will sometimes result in different preference rankings for investment projects.
C)are less dependable than the payback method in ranking investment projects.
D)are less dependable than net present value in ranking investment projects.

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Multiple Choice

Q 32Q 32

Some investment projects require that a company increase its working capital.Under the net present value method, the investment and eventual recovery of working capital should be treated as:
A)an initial cash outflow.
B)a future cash inflow.
C)both an initial cash outflow and a future cash inflow.
D)irrelevant to the net present value analysis.

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Multiple Choice

Q 33Q 33

A company has unlimited funds to invest at its discount rate.The company should invest in all projects having:
A)an internal rate of return greater than zero.
B)a net present value greater than zero.
C)a simple rate of return greater than the discount rate.
D)a payback period less than the project's estimated life.

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Multiple Choice

Q 34Q 34

If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is:
A)equal to 16%.
B)less than 16%.
C)greater than 16%.
D)cannot be determined from this data.

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Multiple Choice

Q 35Q 35

The assumption that the cash flows from an investment project are reinvested at the company's discount rate applies to:
A)both the internal rate of return and the net present value methods.
B)only the internal rate of return method.
C)only the net present value method.
D)neither the internal rate of return nor net present value methods.

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Multiple Choice

Q 36Q 36

The internal rate of return method assumes that a project's cash flows are reinvested at the:
A)internal rate of return.
B)simple rate of return.
C)required rate of return.
D)payback rate of return.

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Multiple Choice

Q 37Q 37

A preference decision in capital budgeting:
A)is concerned with whether a project clears the minimum required rate of return hurdle.
B)comes before the screening decision.
C)is concerned with determining which of several acceptable alternatives is best.
D)involves using market research to determine customers' preferences.

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Multiple Choice

Q 38Q 38

(Ignore income taxes in this problem.)Jarvey Corporation is studying a project that would have a ten-year life and would require a $450,000 investment in equipment which has no salvage value.The project would provide net operating income each year as follows for the life of the project: The company's required rate of return is 12%.The payback period for this project is closest to:
A)3 years
B)2 years
C)4.28 years
D)9 years

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Multiple Choice

Q 39Q 39

(Ignore income taxes in this problem.)Olinick Corporation is considering a project that would require an investment of $343,000 and would last for 8 years.The incremental annual revenues and expenses generated by the project during those 8 years would be as follows: The scrap value of the project's assets at the end of the project would be $23,000.The cash inflows occur evenly throughout the year.The payback period of the project is closest to:
A)3.0 years
B)5.1 years
C)3.2 years
D)4.8 years

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Multiple Choice

Q 40Q 40

(Ignore income taxes in this problem.)The Zingstad Corporation is considering an investment with the following data: Cash inflows occur evenly throughout the year.The payback period for this investment is:
A)3.0 years
B)3.5 years
C)4.0 years
D)4.5 years

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Multiple Choice

Q 41Q 41

(Ignore income taxes in this problem.)The management of Lanzilotta Corporation is considering a project that would require an investment of $263,000 and would last for 8 years.The annual net operating income from the project would be $66,000, which includes depreciation of $31,000.The scrap value of the project's assets at the end of the project would be $15,000.The cash inflows occur evenly throughout the year.The payback period of the project is closest to:
A)3.8 years
B)2.6 years
C)2.7 years
D)4.0 years

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Multiple Choice

Q 42Q 42

(Ignore income taxes in this problem.)A company with $500,000 in operating assets is considering the purchase of a machine that costs $60,000 and which is expected to reduce operating costs by $15,000 each year.These reductions in cost occur evenly throughout the year.The payback period for this machine in years is closest to:
A)0.25 years
B)8.3 years
C)4 years
D)33.3 years

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Multiple Choice

Q 43Q 43

(Ignore income taxes in this problem.)Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions.The auto was purchased for $24,000 and will have a 6-year useful life and a $6,000 salvage value.Delivering prescriptions (which the pharmacy has never done before)should increase gross revenues by at least $28,000 per year.The cost of these prescriptions to the pharmacy will be about $22,000 per year.The pharmacy depreciates all assets using the straight-line method.The payback period for the auto is closest to:
A)2 years
B)1.8 years
C)4 years
D)1.2 years

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Multiple Choice

Q 44Q 44

(Ignore income taxes in this problem.)An investment project requires an initial investment of $100,000.The project is expected to generate net cash inflows of $28,000 per year for the next five years.These cash inflows occur evenly throughout the year.Assuming a 12% discount rate, the project's payback period is:
A)0.28 years
B)3.36 years
C)3.57 years
D)1.40 years

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Multiple Choice

Q 45Q 45

(Ignore income taxes in this problem.)Ataxia Fitness Center is considering an investment in some additional weight training equipment.The equipment has an estimated useful life of 10 years with no salvage value at the end of the 10 years.Ataxia's internal rate of return on this equipment is 8%.Ataxia's discount rate is also 8%.The payback period on this equipment is closest to:
A)10 years
B)6.71 years
C)5 years
D)7.81 years

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Multiple Choice

Q 46Q 46

(Ignore income taxes in this problem.)Jark Corporation has invested in a machine that cost $60,000, that has a useful life of six years, and that has no salvage value at the end of its useful life.The machine is being depreciated by the straight-line method, based on its useful life.It will have a payback period of four years.Given these data, the simple rate of return on the machine is closest to:
A)8.3%
B)7.2%
C)9.5%
D)25%

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Multiple Choice

Q 47Q 47

(Ignore income taxes in this problem.)Parks Corporation is considering an investment proposal in which a working capital investment of $10,000 would be required.The investment would provide cash inflows of $2,000 per year for six years.The working capital would be released for use elsewhere when the project is completed.If the company's discount rate is 10%, the investment's net present value is closest to:
A)$1,290
B)$(1,290)
C)$2,000
D)$4,350

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Multiple Choice

Q 48Q 48

(Ignore income taxes in this problem.)In an effort to reduce costs, Pontic Manufacturing Corporation is considering an investment in equipment that will reduce defects.This equipment will cost $420,000, will have an estimated useful life of 10 years, and will have an estimated salvage value of $50,000 at the end of 10 years.The company's discount rate is 22%.What amount of cost savings will this equipment have to generate per year in each of the 10 years in order for it to be an acceptable project?
A)$50,690 or more
B)$41,315 or more
C)$105,315 or more
D)$94,316 or more

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Multiple Choice

Q 49Q 49

Respass Corporation has provided the following data concerning an investment project that it is considering: The net present value of the project is closest to:
A)$67,000
B)$160,516
C)$516
D)$(5,776)

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Multiple Choice

Q 50Q 50

Puello Corporation has provided the following data concerning an investment project that it is considering: The life of the project is 4 years.The company's discount rate is 8%.The net present value of the project is closest to:
A)$480,000
B)$480,240
C)$100,000
D)$240

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Multiple Choice

Q 51Q 51

Haroldsen Corporation is considering a capital budgeting project that would require an initial investment of $350,000.The investment would generate annual cash inflows of $133,000 for the life of the project, which is 4 years.At the end of the project, equipment that had been used in the project could be sold for $32,000.The company's discount rate is 14%.The net present value of the project is closest to:
A)$214,000
B)$37,429
C)$56,373
D)$406,373

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Multiple Choice

Q 52Q 52

Moates Corporation has provided the following data concerning an investment project that it is considering: The net present value of the project is closest to:
A)$378,963
B)$(31,037)
C)$410,000
D)$58,000

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Multiple Choice

Q 53Q 53

Byerly Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project.The net present value of the project is closest to:
A)$(151,658)
B)$(105,847)
C)$11,000
D)$(44,847)

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Multiple Choice

Q 54Q 54

Penniston Corporation is considering a capital budgeting project that would require an initial investment of $630,000 and working capital of $73,000.The working capital would be released for use elsewhere at the end of the project in 3 years.The investment would generate annual cash inflows of $228,000 for the life of the project.At the end of the project, equipment that had been used in the project could be sold for $29,000.The company's discount rate is 12%.The net present value of the project is closest to:
A)$(134,696)
B)$(82,720)
C)$(9,720)
D)$54,000

Free

Multiple Choice

Q 55Q 55

(Ignore income taxes in this problem)The management of Penfold Corporation is considering the purchase of a machine that would cost $440,000, would last for 7 years, and would have no salvage value.The machine would reduce labor and other costs by $102,000 per year.The company requires a minimum pretax return of 16% on all investment projects.The net present value of the proposed project is closest to:
A)$(28,022)
B)$96,949
C)$(79,196)
D)$274,000

Free

Multiple Choice

Q 56Q 56

(Ignore income taxes in this problem.)Dowlen, Inc., is considering the purchase of a machine that would cost $150,000 and would last for 6 years.At the end of 6 years, the machine would have a salvage value of $23,000.The machine would reduce labor and other costs by $36,000 per year.Additional working capital of $6,000 would be needed immediately.All of this working capital would be recovered at the end of the life of the machine.The company requires a minimum pretax return of 12% on all investment projects.The net present value of the proposed project is closest to:
A)$9,657
B)$(2,004)
C)$6,699
D)$13,223

Free

Multiple Choice

Q 57Q 57

Stomberg Corporation has provided the following data concerning an investment project that it is considering: The life of the project is 4 years.The company's discount rate is 10%.The net present value of the project is closest to:
A)$184,000
B)$579,982
C)$29,982
D)$20,420

Free

Multiple Choice

Q 58Q 58

(Ignore income taxes in this problem.)Fossa Road Paving Corporation is considering an investment in a curb-forming machine.The machine will cost $240,000, will last 10 years, and will have a $40,000 salvage value at the end of 10 years.The machine is expected to generate net cash inflows of $60,000 per year in each of the 10 years.Fossa's discount rate is 18%.The net present value of the proposed investment is closest to:
A)$5,840
B)$37,280
C)$(48,780)
D)$69,640

Free

Multiple Choice

Q 59Q 59

(Ignore income taxes in this problem.)Charlie Corporation is considering buying a new donut maker.This machine will replace an old donut maker that still has a useful life of 6 years.The new machine will cost $3,600 a year to operate, as opposed to the old machine, which costs $3,800 per year to operate.Also, because of increased capacity, an additional 20,000 donuts a year can be produced.The company makes a contribution margin of $0.10 per donut.The old machine can be sold for $7,000 and the new machine costs $30,000.The incremental annual net cash inflows provided by the new machine would be:
A)$2,200
B)$200
C)$2,000
D)$5,000

Free

Multiple Choice

Q 60Q 60

(Ignore income taxes in this problem.)The following data pertain to an investment proposal: The net present value of the proposed investment is closest to:
A)$2,622
B)$5,146
C)$2,524
D)$31,000

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Multiple Choice

Q 61Q 61

Kanzler Corporation is considering a capital budgeting project that would require an initial investment of $450,000 and working capital of $25,000.The working capital would be released for use elsewhere at the end of the project in 4 years.The investment would generate annual cash inflows of $143,000 for the life of the project.At the end of the project, equipment that had been used in the project could be sold for $10,000.The company's discount rate is 14%.The net present value of the project is closest to:
A)$(27,521)
B)$(37,721)
C)$(52,521)
D)$132,000

Free

Multiple Choice

Q 62Q 62

(Ignore income taxes in this problem.)Nevland Corporation is considering the purchase of a machine that would cost $130,000 and would last for 6 years.At the end of 6 years, the machine would have a salvage value of $18,000.By reducing labor and other operating costs, the machine would provide annual cost savings of $44,000.The company requires a minimum pretax return of 19% on all investment projects.The net present value of the proposed project is closest to:
A)$38,040
B)$26,376
C)$74,902
D)$20,040

Free

Multiple Choice

Q 63Q 63

Facio Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project in 3 years.The company's discount rate is 8%.The net present value of the project is closest to:
A)$(113,022)
B)$(61,412)
C)$3,588
D)$52,000

Free

Multiple Choice

Q 64Q 64

(Ignore income taxes in this problem.)Anthony operates a part time auto repair service.He estimates that a new diagnostic computer system will result in increased cash inflows of $1,500 in Year 1, $2,100 in Year 2, and $3,200 in Year 3.If Anthony's required rate of return is 10%, then the most he would be willing to pay for the new diagnostic computer system would be:
A)$4,599
B)$5,501
C)$5,638
D)$5,107

Free

Multiple Choice

Q 65Q 65

Goergen Corporation is considering a capital budgeting project that would require an initial investment of $700,000.The investment would generate annual cash inflows of $267,000 for the life of the project, which is 4 years.The company's discount rate is 10%.The net present value of the project is closest to:
A)$368,000
B)$846,123
C)$146,123
D)$700,000

Free

Multiple Choice

Q 66Q 66

(Ignore income taxes in this problem.)Whitton Corporation uses a discount rate of 16%.The company has an opportunity to buy a machine now for $18,000 that will yield cash inflows of $10,000 per year for each of the next three years.The machine would have no salvage value.The net present value of this machine is closest to:
A)$22,460
B)$4,460
C)$(9,980)
D)$12,000

Free

Multiple Choice

Q 67Q 67

(Ignore income taxes in this problem.)A company has provided the following data concerning a proposed project: The annual cost savings must be closest to:
A)$4,024
B)$2,436
C)$1,875
D)$3,704

Free

Multiple Choice

Q 68Q 68

(Ignore income taxes in this problem.)Orbit Airlines is considering the purchase of a new $275,000 maintenance hangar.The new hangar has an estimated useful life of 5 years with an expected salvage value of $50,000.The new hangar is expected to generate cost savings of $90,000 per year in each of the 5 years.A $20,000 increase in working capital will also be needed for this new hangar.The working capital will be released at the end of the 5 years.Orbit's discount rate is 18%.What is the net present value of the new hangar?
A)$8,280
B)$9,440
C)$17,020
D)$28,280

Free

Multiple Choice

Q 69Q 69

Basey Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project.The net present value of the project is closest to:
A)$(9,048)
B)$(39,048)
C)$(21,888)
D)$194,000

Free

Multiple Choice

Q 70Q 70

(Ignore income taxes in this problem.)Cannula Vending Corporation is expanding operations and needs to purchase additional vending machines.There are currently two companies, Viscera, Inc.and Gullet International, that produce and sell machines that will do the job.Information related to the specifications of each company's machine are as follows: Cannula's discount rate is 18%.Cannula uses the straight-line method of depreciation.Using net present value analysis, which company's machine should Cannula purchase and what is the approximate difference between the net present values of the competing company's machines?
A)Gullet, $127
B)Viscera, $1,562
C)Viscera, $1,749
D)Viscera, $3,438

Free

Multiple Choice

Q 71Q 71

Basta Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project in 4 years.The company's discount rate is 8%.The net present value of the project is closest to:
A)$101,816
B)$126,726
C)$32,726
D)$318,000

Free

Multiple Choice

Q 72Q 72

(Ignore income taxes in this problem.)Congener Beverage Corporation is considering an investment in a project that has an internal rate of return of 20%.The only cash outflow for this project is the initial investment.The project is estimated to have an 8 year life and no salvage value.Cash inflows from this project are expected to be $100,000 per year in each of the 8 years.Congener's discount rate is 16%.What is the net present value of this project?
A)$5,215
B)$15,464
C)$50,700
D)$55,831

Free

Multiple Choice

Q 73Q 73

(Ignore income taxes in this problem.)Highpoint, Inc., is considering investing in automated equipment with a ten-year useful life.Managers at Highpoint have estimated the cash flows associated with the tangible costs and benefits of automation, but have been unable to estimate the cash flows associated with the intangible benefits.Using the company's 12% required rate of return, the net present value of the cash flows associated with just the tangible costs and benefits is a negative $282,500.How large would the annual net cash inflows from the intangible benefits have to be to make this a financially acceptable investment?
A)$20,000
B)$28,250
C)$35,000
D)$50,000

Free

Multiple Choice

Q 74Q 74

(Ignore income taxes in this problem.)Crockin Corporation is considering a machine that will save $9,000 a year in cash operating costs each year for the next six years.At the end of six years it would have no salvage value.If this machine costs $33,165 now, the machine's internal rate of return is closest to:
A)16%
B)17%
C)18%
D)19%

Free

Multiple Choice

Q 75Q 75

(Ignore income taxes in this problem.)The following data pertain to an investment project: The internal rate of return is closest to:
A)12%
B)14%
C)10%
D)8%

Free

Multiple Choice

Q 76Q 76

(Ignore income taxes in this problem.)Heap Corporation is considering an investment in a project that will have a two year life.The project will provide a 10% internal rate of return, and is expected to have a $40,000 cash inflow the first year and a $50,000 cash inflow in the second year.What investment is required in the project?
A)$74,340
B)$77,660
C)$81,810
D)$90,000

Free

Multiple Choice

Q 77Q 77

(Ignore income taxes in this problem.)Bau Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $281,656, would have a useful life of 7 years, and would have no salvage value.The tractor-trailer would be used in the company's hauling business, resulting in additional net cash inflows of $76,000 per year.The internal rate of return on the investment in the tractor-trailer is closest to:
A)19%
B)18%
C)21%
D)16%

Free

Multiple Choice

Q 78Q 78

(Ignore income taxes in this problem.)Welch Corporation is planning an investment with the following characteristics: The initial cost of the equipment is closest to:
A)$157,410
B)$175,005
C)$235,890
D)Cannot be determined from the given information.

Free

Multiple Choice

Q 79Q 79

(Ignore income taxes in this problem.)Golab Roofing is considering the purchase of a crane that would cost $69,846, would have a useful life of 6 years, and would have no salvage value.The use of the crane would result in labor savings of $21,000 per year.The internal rate of return on the investment in the crane is closest to:
A)18%
B)20%
C)19%
D)17%

Free

Multiple Choice

Q 80Q 80

(Ignore income taxes in this problem.)Laws Corporation is considering the purchase of a machine costing $16,000.Estimated cash savings from using the new machine are $4,120 per year.The machine will have no salvage value at the end of its useful life of six years and the required rate of return for Laws Corporation is 12%.The machine's internal rate of return is closest to:
A)12%
B)14%
C)16%
D)18%

Free

Multiple Choice

Q 81Q 81

(Ignore income taxes in this problem.)Given the following data: The life of the equipment must be:
A)it is impossible to determine from the data given
B)5 years
C)6 years
D)7 years

Free

Multiple Choice

Q 82Q 82

(Ignore income taxes in this problem)The management of Elamin Corporation is considering the purchase of a machine that would cost $365,695 and would have a useful life of 9 years.The machine would have no salvage value.The machine would reduce labor and other operating costs by $61,000 per year.The internal rate of return on the investment in the new machine is closest to:
A)9%
B)11%
C)12%
D)10%

Free

Multiple Choice

Q 83Q 83

(Ignore income taxes in this problem)The management of Byrge Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines.The aircraft would have a useful life of 8 years.The company uses a discount rate of 10% in its capital budgeting.The net present value of the investment, excluding the intangible benefits, is -$448,460.To the nearest whole dollar how large would the annual intangible benefit have to be to make the investment in the aircraft financially attractive?
A)$44,846
B)$56,058
C)$84,060
D)$448,460

Free

Multiple Choice

Q 84Q 84

(Ignore income taxes in this problem.)Croce, Inc., is investigating an investment in equipment that would have a useful life of 7 years.The company uses a discount rate of 8% in its capital budgeting.The net present value of the investment, excluding the salvage value, is -$515,967.To the nearest whole dollar how large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive?
A)$41,277
B)$885,021
C)$515,967
D)$6,449,588

Free

Multiple Choice

Q 85Q 85

(Ignore income taxes in this problem)The management of Osborn Corporation is investigating an investment in equipment that would have a useful life of 8 years.The company uses a discount rate of 12% in its capital budgeting.The net present value of the investment, excluding the annual cash inflow, is -$401,414.To the nearest whole dollar how large would the annual cash inflow have to be to make the investment in the equipment financially attractive?
A)$48,170
B)$50,177
C)$80,800
D)$401,414

Free

Multiple Choice

Q 86Q 86

(Ignore income taxes in this problem) Boe Corporation is investigating buying a small used aircraft for the use of its executives.The aircraft would have a useful life of 9 years.The company uses a discount rate of 10% in its capital budgeting.The net present value of the investment, excluding the salvage value of the aircraft, is -$439,527.Management is having difficulty estimating the salvage value of the aircraft.To the nearest whole dollar how large would the salvage value of the aircraft have to be to make the investment in the aircraft financially attractive?
A)$439,527
B)$43,953
C)$4,395,270
D)$1,036,620

Free

Multiple Choice

Q 87Q 87

Perkins Corporation is considering several investment proposals, as shown below: If the project profitability index is used, the ranking of the projects from most to least profitable would be:
A)D, B, C, A
B)B, D, C, A
C)B, D, A, C
D)A, C, B, D

Free

Multiple Choice

Q 88Q 88

(Ignore income taxes in this problem.)Ryner Corporation is considering three investment projects: S, T, and U.Project S would require an investment of $20,000, Project T of $69,000, and Project U of $83,000.No other cash outflows would be involved.The present value of the cash inflows would be $23,200 for Project S, $77,970 for Project T, and $94,620 for Project U.Rank the projects according to the profitability index, from most profitable to least profitable.
A)U, T, S
B)T, S, U
C)U, S, T
D)S, U, T

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Multiple Choice

Q 89Q 89

(Ignore income taxes in this problem.)Trovato Corporation is considering a project that would require an investment of $48,000.No other cash outflows would be involved.The present value of the cash inflows would be $51,840.The profitability index of the project is closest to:
A)0.07
B)0.08
C)0.92
D)1.08

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Multiple Choice

Q 90Q 90

A project has an initial investment of $100,000 and a project profitability index of 0.15.The discount rate is 12%.The net present value of the project is closest to:
A)$15,000
B)$115,000
C)$112,000
D)$12,000

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Multiple Choice

Q 91Q 91

(Ignore income taxes in this problem.)The management of Solar Corporation is considering the following three investment projects: Rank the projects according to the profitability index, from most profitable to least profitable.
A)M, N, L
B)L, N, M
C)N, L, M
D)N, M, L

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Multiple Choice

Q 92Q 92

A project requires an initial investment of $200,000 and has a project profitability index of 0.250.The present value of the future cash inflows from this investment is:
A)$50,000
B)$25,000
C)$250,000
D)$225,000

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Multiple Choice

Q 93Q 93

A company is pondering an investment project that has an internal rate of return which is equal to the company's discount rate.The project profitability index of this investment project is:
A)0.0
B)0.5
C)1.0
D)1.5

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Multiple Choice

Q 94Q 94

Information on four investment proposals is given below: Rank the proposals in terms of preference from highest to lowest according to the project profitability index:
A)3, 2, 1, 4
B)2, 3, 1, 4
C)2, 1, 3, 4
D)4, 1, 2, 3

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Multiple Choice

Q 95Q 95

(Ignore income taxes in this problem.)The management of Leitheiser Corporation is considering a project that would require an initial investment of $51,000.No other cash outflows would be required.The present value of the cash inflows would be $57,630.The profitability index of the project is closest to:
A)1.13
B)0.87
C)0.13
D)0.12

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Multiple Choice

Q 96Q 96

(Ignore income taxes in this problem.)The management of Plotnik Corporation is investigating purchasing equipment that would increase sales revenues by $269,000 per year and cash operating expenses by $156,000 per year.The equipment would cost $294,000 and have a 6 year life with no salvage value.The simple rate of return on the investment is closest to:
A)16.7%
B)38.4%
C)23.8%
D)21.8%

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Multiple Choice

Q 97Q 97

(Ignore income taxes in this problem.)A company is considering buying a machine that costs $500,000, has a useful life of ten years, and is depreciated over its useful life by the straight-line method.The salvage value of the machine at the end of ten years will be $40,000.This machine will replace an old machine that is fully depreciated; the old machine has a salvage value of $75,000 now.If the simple rate of return of this investment is 12.7%, then the anticipated annual incremental net operating income from this machine for each of the next ten years is:
A)$100,000
B)$63,825
C)$53,975
D)$46,380

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Multiple Choice

Q 98Q 98

(Ignore income taxes in this problem.)The management of Ro Corporation is investigating automating a process.Old equipment, with a current salvage value of $11,000, would be replaced by a new machine.The new machine would be purchased for $243,000 and would have a 9 year useful life and no salvage value.By automating the process, the company would save $69,000 per year in cash operating costs.The simple rate of return on the investment is closest to:
A)18.1%
B)11.1%
C)28.4%
D)17.3%

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Multiple Choice

Q 99Q 99

(Ignore income taxes in this problem.)An expansion at Fey, Inc., would increase sales revenues by $150,000 per year and cash operating expenses by $47,000 per year.The initial investment would be for equipment that would cost $328,000 and have a 8 year life with no salvage value.The annual depreciation on the equipment would be $41,000.The simple rate of return on the investment is closest to:
A)41.3%
B)18.9%
C)12.5%
D)31.4%

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Multiple Choice

Q 100Q 100

(Ignore income taxes in this problem.)Crowl Corporation is investigating automating a process by purchasing a machine for $792,000 that would have a 9 year useful life and no salvage value.By automating the process, the company would save $132,000 per year in cash operating costs.The new machine would replace some old equipment that would be sold for scrap now, yielding $21,000.The annual depreciation on the new machine would be $88,000.The simple rate of return on the investment is closest to:
A)11.1%
B)16.7%
C)5.7%
D)5.1%

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Multiple Choice

Q 101Q 101

(Ignore income taxes in this problem.)Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine.The new machine would cost $450,000 and would have a ten-year useful life.Unfortunately, the new machine would have no salvage value.The new machine would cost $20,000 per year to operate and maintain, but would save $100,000 per year in labor and other costs.The old machine can be sold now for scrap for $50,000.The simple rate of return on the new machine is closest to:
A)8.75%
B)20.00%
C)7.78%
D)22.22%

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Multiple Choice

Q 102Q 102

(Ignore income taxes in this problem.)Slomkowski Corporation is contemplating purchasing equipment that would increase sales revenues by $298,000 per year and cash operating expenses by $143,000 per year.The equipment would cost $712,000 and have a 8 year life with no salvage value.The annual depreciation would be $89,000.The simple rate of return on the investment is closest to:
A)9.3%
B)21.8%
C)22.1%
D)12.5%

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Multiple Choice

Q 103Q 103

If the discount rate is 10%, the net present value of the investment is closest to:
A)$370,000
B)$457,479
C)$234,000
D)$87,479

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Multiple Choice

Q 104Q 104

The payback period of this investment is closest to:
A)2.9 years
B)4.9 years
C)3.1 years
D)5.0 years

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Multiple Choice

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Multiple Choice

Q 106Q 106

The simple rate of return for the investment (rounded to the nearest tenth of a percent)is:
A)20.0%
B)13.3%
C)18.0%
D)10.0%

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Multiple Choice

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Multiple Choice

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Multiple Choice

Q 109Q 109

The payback period for the investment would be:
A)2.41 years
B)0.25 years
C)10 years
D)4 years

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Multiple Choice

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Multiple Choice

Q 111Q 111

The net present value of this investment would be:
A)$(14,350)
B)$107,250
C)$77,200
D)$200,000

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Multiple Choice

Q 112Q 112

The payback period on the new machine is closest to:
A)5 years
B)2.7 years
C)3.6 years
D)1.4 years

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Multiple Choice

Q 113Q 113

The simple rate of return for the new machine is closest to:
A)20%
B)37.5%
C)27.5%
D)80.0%

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Multiple Choice

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Multiple Choice

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Multiple Choice

Q 116Q 116

If the new bus is purchased, the present value of the annual cash operating costs associated with this alternative is closest to:
A)$(54,800)
B)$(36,500)
C)$(16,200)
D)$(42,800)

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Multiple Choice

Q 117Q 117

If the present bus is repaired, the present value of the annual cash operating costs associated with this alternative is closest to:
A)$(36,500)
B)$(16,200)
C)$(47,200)
D)$(54,800)

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Multiple Choice

Q 118Q 118

If the present bus is repaired, the present value of the salvage received on sale of the bus seven years from now is closest to:
A)$(2,260)
B)$2,260
C)$904
D)$(904)

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Multiple Choice

Q 119Q 119

The net present value of the alternative of overhauling the present system is closest to:
A)$(1,279,316)
B)$(1,119,316)
C)$801,284
D)$(1,194,036)

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Multiple Choice

Q 120Q 120

The net present value of the alternative of purchasing the new system is closest to:
A)$(1,076,495)
B)$(1,236,495)
C)$(1,169,895)
D)$(969,895)

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Multiple Choice

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Multiple Choice

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Multiple Choice

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Multiple Choice

Q 124Q 124

The net present value of Project B is closest to:
A)$77,805
B)$127,805
C)$55,005
D)$105,005

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Multiple Choice

Q 125Q 125

The net present value of the overhaul alternative is closest to:
A)$(750,300)
B)$(725,800)
C)$(975,800)
D)$(987,400)

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Multiple Choice

Q 126Q 126

The net present value of the new system alternative is closest to:
A)$(862,900)
B)$(552,900)
C)$(758,400)
D)$(987,400)

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Multiple Choice

Q 127Q 127

The present value of the annual cost savings of $78,000 is closest to:
A)$763,064
B)$177,027
C)$546,000
D)$367,536

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Multiple Choice

Q 128Q 128

The net present value of the proposed project is closest to:
A)$15,646
B)$89,588
C)$7,536
D)$186,000

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Multiple Choice

Q 129Q 129

The combined present value of the working capital needed at the beginning of the project and the working capital released at the end of the project is closest to:
A)$(3,004)
B)$0
C)$(12,080)
D)$11,816

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Multiple Choice

Q 130Q 130

The net present value of the proposed project is closest to:
A)$9,584
B)$78,530
C)$22,532
D)$19,528

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Multiple Choice

Q 131Q 131

The present value of the annual cost savings of $72,000 is closest to:
A)$22,608
B)$874,298
C)$504,000
D)$274,464

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Multiple Choice

Q 132Q 132

The net present value of the proposed project is closest to:
A)$(29,522)
B)$(45,536)
C)$5,464
D)$(94,042)

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Multiple Choice

Q 133Q 133

The net present value of the project is closest to:
A)$171,000
B)$136,400
C)$141,500
D)$560,000

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Multiple Choice

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Multiple Choice

Q 135Q 135

Ignoring the annual benefit, to the nearest whole dollar how large would the salvage value of the aircraft have to be to make the investment in the aircraft financially attractive?
A)$57,101
B)$439,238
C)$3,378,754
D)$808,910

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Multiple Choice

Q 136Q 136

Ignoring any salvage value, to the nearest whole dollar how large would the annual benefit have to be to make the investment in the aircraft financially attractive?
A)$439,238
B)$124,890
C)$87,848
D)$57,101

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Multiple Choice

Q 137Q 137

Ignoring any salvage value, to the nearest whole dollar how large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive?
A)$40,820
B)$22,229
C)$28,009
D)$155,606

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Multiple Choice

Q 138Q 138

Ignoring any cash flows from intangible benefits, to the nearest whole dollar how large would the salvage value of the automated equipment have to be to make the investment in the automated equipment financially attractive?
A)$495,561
B)$28,009
C)$155,606
D)$864,478

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Multiple Choice

Q 139Q 139

Ignoring any salvage value, to the nearest whole dollar how large would the annual cash inflow have to be to make the investment in the equipment financially attractive?
A)$54,660
B)$49,194
C)$87,400
D)$273,300

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Multiple Choice

Q 140Q 140

Ignoring the cash inflows, to the nearest whole dollar how large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive?
A)$625,400
B)$1,518,333
C)$273,300
D)$49,194

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Multiple Choice

Q 141Q 141

The profitability index of investment project X is closest to:
A)0.11
B)0.88
C)1.12
D)0.12

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Multiple Choice

Q 142Q 142

Rank the projects according to the profitability index, from most profitable to least profitable.
A)Y, W, X
B)X, Y, W
C)X, W, Y
D)W, Y, X

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Multiple Choice

Q 143Q 143

The profitability index of investment project D is closest to:
A)0.16
B)0.84
C)0.14
D)1.16

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Multiple Choice

Q 144Q 144

Rank the projects according to the profitability index, from most profitable to least profitable.
A)E, C, D
B)E, D, C
C)D, C, E
D)C, E, D

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Multiple Choice

Q 145Q 145

(Ignore income taxes in this problem.)Ostermeyer Corporation is considering a project that would require an initial investment of $247,000 and would last for 7 years.The incremental annual revenues and expenses for each of the 7 years would be as follows: At the end of the project, the scrap value of the project's assets would be $16,000.
Required:
Determine the payback period of the project.Show your work!

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Essay

Q 146Q 146

(Ignore income taxes in this problem.)The management of Truelove Corporation is considering a project that would require an initial investment of $321,000 and would last for 7 years.The annual net operating income from the project would be $28,000, including depreciation of $42,000.At the end of the project, the scrap value of the project's assets would be $27,000.
Required:
Determine the payback period of the project.Show your work!

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Essay

Q 147Q 147

(Ignore income taxes in this problem.)Ursus, Inc., is considering a project that would have a ten-year life and would require a $1,000,000 investment in equipment.At the end of ten years, the project would terminate and the equipment would have no salvage value.The project would provide net operating income each year as follows: All of the above items, except for depreciation, represent cash flows.The company's required rate of return is 12%.
Required:
a.Compute the project's net present value.
b.Compute the project's internal rate of return to the nearest whole percent.
c.Compute the project's payback period.
d.Compute the project's simple rate of return.

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Essay

Q 148Q 148

(Ignore income taxes in this problem.)Hady Corporation is considering purchasing a machine that would cost $688,800 and have a useful life of 7 years.The machine would reduce cash operating costs by $118,759 per year.The machine would have no salvage value.
Required:
a.Compute the payback period for the machine.
b.Compute the simple rate of return for the machine.

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Essay

Q 149Q 149

(Ignore income taxes in this problem.)Bied's Pharmacy has purchased a small auto for delivery of prescriptions.The auto cost $28,000 and will be usable for seven years.Delivery of prescriptions (which the pharmacy has never done before)should increase revenues by at least $25,000 per year.The cost of these prescriptions will be about $18,000 per year.The pharmacy depreciates all assets by the straight-line method.
Required:
a.Compute the payback period on the new auto.
b.Compute the simple rate of return of the new auto.

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Essay

Q 150Q 150

(Ignore income taxes in this problem.)Cardinal Pharmacy has purchased a small auto for delivery of prescriptions.The auto cost $28,000 and will be usable for four years.Delivery of prescriptions (which the pharmacy has never done before)should increase revenues by at least $40,000 per year.The cost of these prescriptions will be about $30,000 per year.The pharmacy depreciates all assets by the straight-line method.
Required:
a.Compute the payback period on the new auto.
b.Compute the simple rate of return of the new auto.

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Essay

Q 151Q 151

(Ignore income taxes in this problem.)Ramson Corporation is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years.The machine would reduce cash operating costs by $132,632 per year.The machine would have a salvage value of $151,200 at the end of the project.
Required:
a.Compute the payback period for the machine.
b.Compute the simple rate of return for the machine.

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Essay

Q 152Q 152

(Ignore income taxes in this problem.)The following data concern an investment project: The working capital will be released for use elsewhere at the conclusion of the project.
Required:
Compute the project's net present value.

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Essay

Q 153Q 153

(Ignore income taxes in this problem.)The management of Kinion Corporation is considering the purchase of a machine that would cost $170,000, would last for 4 years, and would have no salvage value.The machine would reduce labor and other costs by $60,000 per year.The company requires a minimum pretax return of 12% on all investment projects.
Required:
Determine the net present value of the project.Show your work!

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Essay

Q 154Q 154

(Ignore income taxes in this problem.)Bill Anders is considering investing in a franchise in a fast-food chain. He would have to purchase equipment costing $420,000 to equip the outlet and invest an additional $30,000 for inventories and other working capital needs.Other outlets in the fast-food chain have an annual net cash inflow of about $120,000.Mr.Anders would close the outlet in 5 years.He estimates that the equipment could be sold at that time for about 10% of its original cost and the working capital would be released for use elsewhere.Mr.Anders' required rate of return is 8%.
Required:
What is the investment's net present value? Is this an acceptable investment?

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Essay

Q 155Q 155

(Ignore income taxes in this problem.)Wary Corporation is considering the purchase of a machine that would cost $240,000 and would last for 9 years.At the end of 5 years, the machine would have a salvage value of $29,000.The machine would reduce labor and other costs by $63,000 per year.The company requires a minimum pretax return of 10% on all investment projects.
Required:
Determine the net present value of the project.Show your work!

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Essay

Q 156Q 156

(Ignore income taxes in this problem.)Joanette, Inc., is considering the purchase of a machine that would cost $240,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $48,000.The machine would reduce labor and other costs by $62,000 per year.Additional working capital of $7,000 would be needed immediately, all of which would be recovered at the end of 5 years.The company requires a minimum pretax return of 17% on all investment projects.
Required:
Determine the net present value of the project.Show your work!

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Essay

Q 157Q 157

(Ignore income taxes in this problem.)Bradley Corporation's required rate of return is 14%.The company has an opportunity to be the exclusive distributor of a very popular consumer item.No new equipment would be needed, but the company would have to use one-fourth of the space in a warehouse it owns.The warehouse cost $200,000 new.The warehouse is currently half-empty and there are no other plans to use the empty space.In addition, the company would have to invest $100,000 in working capital to carry inventories and accounts receivable for the new product line.The company would have the distributorship for only 5 years.The distributorship would generate a $17,000 annual net cash inflow.
Required:
What is the net present value of the project?

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Essay

Q 158Q 158

(Ignore income taxes in this problem.)Gallatin, Inc., has assembled the estimates shown below relating to a proposed new product.These estimates are based on a 5-year project life, at the end of which the new equipment would be sold, working capital would revert to other uses in the company, and the product would be discontinued.Gallatin uses a discount rate of 10%. Required:
Compute the net present value of the new product.

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Essay

Q 159Q 159

(Ignore income taxes in this problem.)Strausberg Inc.is considering investing in a project that would require an initial investment of $270,000.The life of the project would be 4 years.The annual net cash inflows from the project would be $81,000.The salvage value of the assets at the end of the project would be $27,000.The company uses a discount rate of 10%.
Required:
Compute the net present value of the project.

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Essay

Q 160Q 160

(Ignore income taxes in this problem.)Jim Bingham is considering starting a small catering business.He would invest $125,000 to purchase a delivery van and various equipment and another $60,000 for inventories and other working capital needs.Rent for the building used by the business will be $35,000 per year.In addition to the building rent, annual cash outflow for operating costs will amount to $40,000.The annual cash inflow from the business will amount to $120,000.Jim wants to operate the catering business for only six years.He estimates that the equipment could be sold at that time for 4% of its original cost.Jim uses a 16% discount rate.All cash flows, except for the initial investment, would occur at the ends of the years.The investment in working capital would be returned at the end of the six years.
Required:
Compute the net present value of this investment.

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Essay

Q 161Q 161

(Ignore income taxes in this problem.)Mattice Corporation is considering investing $440,000 in a project.The life of the project would be 5 years.The project would require additional working capital of $34,000, which would be released for use elsewhere at the end of the project.The annual net cash inflows would be $123,000.The salvage value of the assets used in the project would be $49,000.The company uses a discount rate of 11%.
Required:
Compute the net present value of the project.

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Essay

Q 162Q 162

(Ignore income taxes in this problem.)Consider the following three investment opportunities:
Project I would require an immediate cash outlay of $40,000 and would result in cash savings of $9,000 each year for 5 years.
Project II would require cash outlays of $7,000 per year and would provide a cash inflow of $40,000 at the end of 5 years.
Project III would require a cash outlay of $36,000 now and would provide a cash inflow of $60,000 at the end of 5 years.
Required:
The discount rate is 10%.Use the net present value method to determine which, if any, of the three projects is acceptable.

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Essay

Q 163Q 163

(Ignore income taxes in this problem.)Cooney Inc.has provided the following data concerning a proposed investment project: The company uses a discount rate of 17%.
Required:
Compute the net present value of the project.

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Essay

Q 164Q 164

(Ignore income taxes in this problem.)Tiff Corporation has provided the following data concerning a proposed investment project: The company uses a discount rate of 16%.The working capital would be released at the end of the project.
Required:
Compute the net present value of the project.

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Essay

Q 165Q 165

(Ignore income taxes in this problem.)Maxcy Limos, Inc., is considering the purchase of a limousine that would cost $187,335, would have a useful life of 9 years, and would have no salvage value.The limousine would bring in cash inflows of $45,000 per year in excess of its cash operating costs.
Required:
Determine the internal rate of return on the investment in the new limousine.Show your work!

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Essay

Q 166Q 166

(Ignore income taxes in this problem.)HI Corporation is considering the purchase of a machine that promises to reduce operating costs by the same amount for every year of its 5-year useful life.The machine will cost $205,980 and has no salvage value.The machine has a 14% internal rate of return.
Required:
What are the annual cost savings promised by the machine?

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Essay

Q 167Q 167

(Ignore income taxes in this problem.)The management of Zachery Corporation is considering the purchase of a automated molding machine that would cost $203,255, would have a useful life of 5 years, and would have no salvage value.The automated molding machine would result in cash savings of $65,000 per year due to lower labor and other costs.
Required:
Determine the internal rate of return on the investment in the new automated molding machine.Show your work!

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Essay

Q 168Q 168

(Ignore income taxes in this problem.)Boxton Corporation's required rate of return is 12%.The company is considering the purchase of a new machine that will save $20,000 per year in cash operating costs.The machine will cost $128,360 and will have a 10-year useful life with zero salvage value.Straight-line depreciation will be used.
Required:
Compute the machine's internal rate of return.Would you recommend purchase of the machine? Explain.

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Essay

Q 169Q 169

(Ignore income taxes in this problem.)The management of Harling Corporation is considering the purchase of a machine that would cost $90,504 and would have a useful life of 5 years.The machine would have no salvage value.The machine would reduce labor and other operating costs by $27,000 per year.
Required:
Determine the internal rate of return on the investment in the new machine.Show your work!

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Essay

Q 170Q 170

(Ignore income taxes in this problem.)The management of Crosson Corporation is investigating the purchase of a new satellite routing system with a useful life of 9 years.The company uses a discount rate of 17% in its capital budgeting.The net present value of the investment, excluding its intangible benefits, is -$173,055.
Required:
How large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive?

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Essay

Q 171Q 171

(Ignore income taxes in this problem.)Devon Corporation uses a discount rate of 8% in its capital budgeting.Partial analysis of an investment in automated equipment with a useful life of 8 years has thus far yielded a net present value of -$496,541.This analysis did not include any estimates of the intangible benefits of automating this process nor did it include any estimate of the salvage value of the equipment.
Required:
a.Ignoring any salvage value, how large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive?
b.Ignoring any cash flows from intangible benefits, how large would the salvage value of the automated equipment have to be to make the investment in the automated equipment financially attractive?

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Essay

Q 172Q 172

(Ignore income taxes in this problem.)The management of an amusement park is considering purchasing a new ride for $80,000 that would have a useful life of 10 years and a salvage value of $10,000.The ride would require annual operating costs of $32,000 throughout its useful life.The company's discount rate is 9%.Management is unsure about how much additional ticket revenue the new ride would generate-particularly since customers pay a flat fee when they enter the park that entitles them to unlimited rides.Hopefully, the presence of the ride would attract new customers.
Required:
How much additional revenue would the ride have to generate per year to make it an attractive investment?

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Essay

Q 173Q 173

(Ignore income taxes in this problem.)Chipps Corporation uses a discount rate of 9% in its capital budgeting.Management is considering an investment in telecommunications equipment with a useful life of 5 years.Excluding the salvage value of the equipment, the net present value of the investment in the equipment is -$530,985.
Required:
How large would the salvage value of the telecommunications equipment have to be to make the investment in the telecommunications equipment financially attractive?

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Essay

Q 174Q 174

(Ignore income taxes in this problem.)Choudhury Corporation is considering the following three investment projects: The only cash outflows are the initial investments in the projects.
Required:
Rank the investment projects using the project profitability index.Show your work

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Essay

Q 175Q 175

(Ignore income taxes in this problem.)The management of Winstead Corporation is considering the following three investment projects: The only cash outflows are the initial investments in the projects.
Required:
Rank the investment projects using the project profitability index.Show your work

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Essay

Q 176Q 176

(Ignore income taxes in this problem.)The management of Nixon Corporation is investigating purchasing equipment that would cost $518,000 and have a 7 year life with no salvage value.The equipment would allow an expansion of capacity that would increase sales revenues by $364,000 per year and cash operating expenses by $211,000 per year.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent.Show your work!

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Essay

Q 177Q 177

(Ignore income taxes in this problem.)Russnak Corporation is investigating automating a process by purchasing a new machine for $198,000 that would have a 9 year useful life and no salvage value.By automating the process, the company would save $68,000 per year in cash operating costs.The company's current equipment would be sold for scrap now, yielding $18,000.The annual depreciation on the new machine would be $22,000.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent.Show your work!

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Essay

Q 178Q 178

(Ignore income taxes in this problem.)Ducey Corporation is contemplating purchasing equipment that would increase sales revenues by $79,000 per year and cash operating expenses by $27,000 per year.The equipment would cost $150,000 and have a 6 year life with no salvage value.The annual depreciation would be $25,000.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent.Show your work!

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Essay

Q 179Q 179

(Ignore income taxes in this problem.)The management of Schenk Corporation is investigating automating a process by replacing old equipment by a new machine.The old equipment would be sold for scrap now for $13,000.The new machine would cost $648,000, would have a 9 year useful life, and would have no salvage value.By automating the process, the company would save $186,000 per year in cash operating costs.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent.Show your work!

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