Question : 55.Projects with a negative net present value will always have : 1302827

55.Projects with a negative net present value will always have a(n)

A.payback period shorter than the life of the project.

B.accounting rate of return that is greater than zero.

C.an internal rate of return greater than the cost of capital.

D.None of these answer choices are correct.

56.The required rate of return used to calculate an investment’s net present value is related to the firm’s

A.contribution margin.

B.cost of capital.

C.depreciation methods.

D.fixed costs.

57.Maude Company’s required rate of return on capital budgeting projects is 9%. The company is considering an investment that would yield a cash flow of $12,000 per year for five years. Ignoring taxes, what is the most that the company will be willing to invest in this project?

A.$46,676

B.$38,994

C.$60,000

D.$55,046

58.An investment that costs $50,000 will return $15,000 operating cash flows per year for five years. Determine the net present value of the investment if the required rate of return is 14 percent. Should the investment be undertaken?

A.Yes, the profit is $25,000.

B.No, the accounting return is less than 14%.

C.No, the net present value is negative at $11,045.

D.Yes, the net present value is positive at $1,496.50.

59.Santo Automotive is considering producing a new automobile product, No Text, which disengages the ability to text while driving. Marketing data indicate that the company will be able to sell 40,000 units per year at $16 each. The product will be produced in a section of an existing factory that is currently not in use. To produce No Text, Santo must buy a machine that costs $820,000. The machine has an expected life of five years and will have an ending residual value of $50,000. Santo will depreciate the machine over five years using the straight-line method. In addition to the cost of the machine, the company will incur incremental annual manufacturing costs of $390,000. The income tax rate is 30% and the company’s required rate of return is 10%. How much is net operating cash flow each year?

A.$67,200

B.$221,200

C.$175,000

D.$250,000

60.Santo Automotive is considering producing a new automobile product, No Text, which disengages the ability to text while driving. Marketing data indicate that the company will be able to sell 39,000 units per year at $16 each. The product will be produced in a section of an existing factory that is currently not in use. To produce No Text, Santo must buy a machine that costs $820,000. The machine has an expected life of five years and will have an ending residual value of $50,000. Santo expects to generate net income of $56,000 per year. The income tax rate is 30% and the company’s required rate of return is 10%. How much is the net present value?

A.($23,932)

B.$7,113

C.$52,498

D.None of these answer choices are correct.

61.What does the cost of capital represent?

A.The weighted average of fixed and variable costs

B.The weighted average of the incremental cash inflows and outflows

C.The weighted average of debt and equity financing

D.The weighted average of the cost of borrowing on a long and short-term basis

62.The return demanded by shareholders for the risk that they bear in supplying capital to the firm is

A.less for riskier firms.

B.only considered when a corporation has no debt.

C.measured by the internal rate of return.

D.called the cost of equity.

63.Since present value analysis is concerned with cash flows, which of the following is not true?

A.Depreciation is always an incremental cash inflow.

B.Revenues are inflows in the period when the cash is received.

C.Expenses are outflows in the period when they are paid.

D.The salvage value of equipment is considered in the analysis.

64.Natchez, Inc. is considering the purchase of a new machine costing $200,000. The company will incur $5,000 per year in operating expenses but it will allow the company to earn an additional $100,000 per year in revenues. Natchez expects the machine to provide future benefits for 3 years and salvage value at the end of the 3-year period to be $10,000. The company uses straight-line depreciation method. The income tax rate is 30%. If the required rate of return is 10%, how much is the net present value of this project?

A.$20,143

B.$12,629

C.$43,769

D.None of these answer choices are correct.