Question :
81. The management of Douglass Corporation considering the purchase of a : 1233931
81. The management of Douglass Corporation is considering the purchase of a new machine costing $375,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation:
Year
Income fromOperations
Net CashFlow
1
$18,750
$93,750
2
18,750
93,750
3
18,750
93,750
4
18,750
93,750
5
18,750
93,750
The cash payback period for this investment is: A. 4 yearsB. 5 yearsC. 20 yearsD. 3 years
82. The management of Douglass Corporation is considering the purchase of a new machine costing $375,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation:
Year
Income fromOperations
Net CashFlow
1
$18,750
$93,750
2
18,750
93,750
3
18,750
93,750
4
18,750
93,750
5
18,750
93,750
The average rate of return for this investment is: A. 5%B. 10%C. 25%D. 15%
83. The management of Douglass Corporation is considering the purchase of a new machine costing $375,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation:
Year
Income fromOperations
Net CashFlow
1
$18,750
$93,750
2
18,750
93,750
3
18,750
93,750
4
18,750
93,750
5
18,750
93,750
The net present value for this investment is: A. Negative $118,145B. Positive $118,145C. Positive $19,875D. Negative $19,875
84. The management of Douglass Corporation is considering the purchase of a new machine costing $375,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation:
Year
Income fromOperations
Net CashFlow
1
$18,750
$93,750
2
18,750
93,750
3
18,750
93,750
4
18,750
93,750
5
18,750
93,750
The present value index for this investment is: A. 1.00B. .95C. 1.25D. 1.05
85. Hotaling Corporation is analyzing a capital expenditure that will involve a cash outlay of $146,040. Estimated cash flows are expected to be $30,000 annually for seven years. The present value factors for an annuity of $1 for 7 years at interest of 6%, 8%, 10%, and 12% are 5.582, 5.206, 4.868, and 4.564, respectively. The internal rate of return for this investment is: A. 10%B. 6%C. 12%D. 8%
86. Gossman Corporation is analyzing a capital expenditure that will involve a cash outlay of $104,904. Estimated cash flows are expected to be $36,000 annually for four years. The present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%, and 15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this investment is: A. 2%B. 2.4%C. 14%D. 3%
87. Below is a table for the present value of $1 at Compound interest.
Year
6%
10%
12%
1
.943
.909
.893
2
.890
.826
.797
3
.840
.751
.712
4
.792
.683
.636
5
.747
.621
.567
Below is a table for the present value of an annuity of $1 at compound interest.
Year
6%
10%
12%
1
.943
.909
.893
2
1.833
1.736
1.69
3
2.673
2.487
2.402
4
3.465
3.17
3.037
5
4.212
3.791
3.605
Using the tables above, what would be the present value of $15,000 (rounded to the nearest dollar) to be received one year from today, assuming an earnings rate of 6%? A. $13,500B. $14,145C. $15,500D. $12,272
88. Below is a table for the present value of $1 at Compound interest.
Year
6%
10%
12%
1
.943
.909
.893
2
.890
.826
.797
3
.840
.751
.712
4
.792
.683
.636
5
.747
.621
.567
Below is a table for the present value of an annuity of $1 at compound interest.
Year
6%
10%
12%
1
.943
.909
.893
2
1.833
1.736
1.69
3
2.673
2.487
2.402
4
3.465
3.17
3.037
5
4.212
3.791
3.605
Using the tables above, what would be the present value of $8,000 (rounded to the nearest dollar) to be received two years from today, assuming an earnings rate of 12%? A. $6,376B. $7,144C. $5,696D. $5,088
89. Below is a table for the present value of $1 at Compound interest.
Year
6%
10%
12%
1
.943
.909
.893
2
.890
.826
.797
3
.840
.751
.712
4
.792
.683
.636
5
.747
.621
.567
Below is a table for the present value of an annuity of $1 at compound interest.
Year
6%
10%
12%
1
.943
.909
.893
2
1.833
1.736
1.69
3
2.673
2.487
2.402
4
3.465
3.17
3.037
5
4.212
3.791
3.605
Using the tables above, what is the present value of $3,000 (rounded to the nearest dollar) to be received at the end of each of the next 3 years, assuming an earnings rate of 10%? A. $7,510B. $6,759C. $7,461D. $24,870
90. Below is a table for the present value of $1 at Compound interest.
Year
6%
10%
12%
1
.943
.909
.893
2
.890
.826
.797
3
.840
.751
.712
4
.792
.683
.636
5
.747
.621
.567
Below is a table for the present value of an annuity of $1 at compound interest.
Year
6%
10%
12%
1
.943
.909
.893
2
1.833
1.736
1.69
3
2.673
2.487
2.402
4
3.465
3.17
3.037
5
4.212
3.791
3.605
Using the tables above, if an investment is made now for $20,000 that will generate a cash inflow of $8,000 a year for the next 4 years, what would be the net present value (rounded to the nearest dollar) of the investment, (assuming an earnings rate of 12%)? A. $20,352B. $352C. $24,296D. $4,296