Question : 61. Grant Manufacturing considering investing in equipment that costs $70,000. The : 1295632

61. Grant Manufacturing is considering investing in equipment that costs $70,000. The equipment would be depreciated using the straight-line method with no half-year convention over seven years and have no salvage value. If the company has a 40 percent income tax rate and desires an after-tax rate of return of 14 percent on investments, the total present value of the depreciation tax shield is: 
A. $42.883
B. $27,972
C. $25,730
D. $17,153

62. Triangle Catering is considering investing in new equipment that costs $100,000. The equipment would be depreciated using the straight-line method with no half-year convention over five years and have no salvage value. If the company has a 35 percent income tax rate and desires an after-tax rate of return of 15 percent on investments, the total present value of the depreciation tax shield is: 
A. $67,044
B. $43,579
C. $23,465
D. $49,720

63. Buchanan Enterprises is considering investing in a machine that costs $400,000. The machine is expected to generate revenues of $175,000 per year for five years. The machine would be depreciated using the straight-line method over its five year life and have no salvage value. The company considers the impact of income taxes in all of its capital investment decisions. The company has a 40 percent income tax rate and desires an after-tax rate of return of 10 percent on its investment. The net present value of the machine is: 
A. $179,992
B. $(13,338)
C. $119,340
D. $  (1,966)

64. Tyson Enterprises is considering investing in a machine that costs $30,000. The machine is expected to generate revenues of $10,000 per year for six years. The machine would be depreciated using the straight-line method over its six year life and have no salvage value. The company considers the impact of income taxes in all of its capital investment decisions. The company has a 40 percent income tax rate and desires an after-tax rate of return of 12 percent on its investment. The net present value of the machine is: 
A. $   2,891
B. $  (5,332)
C. $(13,555)
D. $ 15,225

65. A local day spa is considering investing in a machine that costs $60,000. The machine is expected to generate revenues of $25,000 per year for five years. The machine would be depreciated using the straight-line method over its five year life and have no salvage value. The company considers the impact of income taxes in all of its capital investment decisions. The company has a 35 percent income tax rate and desires an after-tax rate of return of 14 percent on its investment. The net present value of the machine is: 
A. $36,985
B. $10,207
C. $25,828
D. $22,566

66. Jameson Inc. is considering investing in a new piece of equipment that costs $1,000,000. The equipment is expected to generate revenues of $300,000 per year for ten years. The equipment would be depreciated using the straight-line method over its ten year life and have a salvage value of $40,000. The company considers the impact of income taxes in all of its capital investment decisions. The company has a 40 percent income tax rate and desires an after-tax rate of return of 14 percent on its investment. The net present value of the machine is: 
A. $147,542
B. $154,015
C. $158,330
D. $258,337

67. Pauline’s Products Inc. is considering investing in a new piece of equipment that costs $75,000. The equipment is expected to generate revenues of $25,000 per year for five years. The equipment would be depreciated using the straight-line method over its five year life and have a salvage value of $8,000. The company considers the impact of income taxes in all of its capital investment decisions. The company has a 35 percent income tax rate and desires an after-tax rate of return of 12 percent on its investment. The net present value of the equipment is: 
A. $   7,042
B. $(13,472)
C. $ 21,248
D. $   5,453

68. Mac Products Inc. is considering the purchase of a new machine. The estimated cost of the machine is $30,000. The machine is expected to generate annual cash inflows over the next three years as follows:
 

Year

Annual cash flow

1

$25,000

2

$20,000

3

$15,000

The machine will be depreciated over its three-year life using the straight-line method and is not expected to have a residual value at the end of its useful life. The company considers income tax effects in all of its capital investment decisions. If the company’s income tax rate is 35% and they desire an after-tax return of 14% on investments, the net present value of the new machine is: 
A. $  8,965
B. $24,056
C. $12,338
D. $     840

69. The length of time needed for a long-term project to recapture its initial investment amount is called the: 
A. discount period.
B. internal rate of return.
C. present value.
D. payback period.

70. Which of the following does not require time value of money computations in order to solve? 
A. Net present value
B. Profitability index
C. Payback period
D. Internal rate of return