Question : 71. Which method of evaluating capital investment proposals uses present value : 1251754

71. Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals? A. Internal rate of returnB. Cash paybackC. Net present valueD. Average rate of return

72. A series of equal cash flows at fixed intervals is termed a(n): A. present value indexB. price-level indexC. net cash flowD. annuity

73. The present value index is computed using which of the following formulas? A. Amount to be invested/Average rate of returnB. Total present value of net cash flow/Amount to be investedC. Total present value of net cash flow/Average rate of returnD. Amount to be invested/Total present value of net cash flow

74. Hazard Company is considering the acquisition of a machine that costs $375,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual cash flow of $150,000, and annual operating income of $87,500. What is the estimated cash payback period for the machine? A. 3 yearsB. 4.3 yearsC. 2.5 yearsD. 5 years

75. The expected average rate of return for a proposed investment of $4,800,000 in a fixed asset, using straight line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $12,000,000 is: A. 25%B. 18%C. 40%D. 12.5%

76. The present value factor for an annuity of $1 is determined using which of the following formulas? A. Amount to be invested/Annual average net incomeB. Annual net cash flow/Amount to be investedC. Annual average net income/Amount to be investedD. Amount to be invested/Annual net cash flow

77. The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company’s desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: 

YearIncome fromOperationsNet CashFlow

1$100,000$180,000

240,000120,000

340,000100,000

410,00090,000

510,000120,000

The cash payback period for this investment is: A. 5 yearsB. 4 yearsC. 2 yearsD. 3 years

78. The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company’s desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: 

YearIncome fromOperationsNet CashFlow

1$100,000$180,000

240,000120,000

340,000100,000

410,00090,000

510,000120,000

The average rate of return for this investment is: A. 18%B. 16%C. 58%D. 10%

79. The management of Arkansas Corporation is considering the purchase of a new machine costing $490,000. The company’s desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: 

YearIncome fromOperationsNet Cash   Flow

1$100,000$180,000

240,000120,000

340,000100,000

410,00090,000

510,000120,000

The net present value for this investment is: A. positive $36,400B. positive $55,200C. Negative $16,170D. Negative $126,800

80. The management of California Corporation is considering the purchase of a new machine costing $400,000. The company’s desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: 

YearIncome fromOperationsNet Cash     Flow

1$100,000$180,000

240,000120,000

320,000100,000

410,00090,000

510,00090,000

The present value index for this investment is: A. .88B. 1.45C. 1.14D. .70