Question : 101. The management of Arnold Corporation considering the purchase of a : 1233933

 

101. The management of Arnold 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: 

Year

Income fromOperations

Net CashFlow

1

$100,000

$180,000

2

40,000

120,000

3

20,000

100,000

4

10,000

90,000

5

10,000

90,000

 

 

 

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

102. The management of Arnold 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: 

Year

Income fromOperations

Net CashFlow

1

$100,000

$180,000

2

60,000

120,000

3

30,000

100,000

4

10,000

90,000

5

10,000

90,000

 

 

 

The average rate of return for this investment is: A. 18%B. 21%C. 53%D. 10%

103. The management of Arnold Corporation is considering the purchase of a new machine costing $430,000. 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: 

Year

Income fromOperations

Net CashFlow

1

$100,000

$180,000

2

40,000

120,000

3

20,000

100,000

4

10,000

90,000

5

10,000

90,000

 

 

 

The net present value for this investment is: A. positive $16,400B. positive $25,200C. Negative $99,600D. Negative $126,800

104. The management of Arnold Corporation is considering the purchase of a new machine costing $420,000. 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: 

Year

Income fromOperations

Net CashFlow

1

$100,000

$180,000

2

40,000

120,000

3

20,000

100,000

4

10,000

90,000

5

10,000

90,000

 

 

 

The present value index for this investment is: A. 1.08B. 1.45C. 1.14D. .70

105. The management of Douglass Corporation is considering the purchase of a new machine costing $475,000. 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

$20,000

$95,000

2

20,000

95,000

3

20,000

95,000

4

20,000

95,000

5

20,000

95,000

 

 

 

The cash payback period for this investment is: A. 4 yearsB. 5 yearsC. 20 yearsD. 3 years

106. The management of Douglass Corporation is considering the purchase of a new machine costing $380,000. 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

$20,000

$95,000

2

20,000

95,000

3

20,000

95,000

4

20,000

95,000

5

20,000

95,000

 

 

 

The cash payback period for this investment is: A. 4 yearsB. 5 yearsC. 20 yearsD. 3 years

107. The management of Douglass Corporation is considering the purchase of a new machine costing $380,000. 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

$20,000

$95,000

2

20,000

95,000

3

20,000

95,000

4

20,000

95,000

5

20,000

95,000

 

 

 

The average rate of return for this investment is: A. 5%B. 10.5%C. 25%D. 15%

108. The management of Douglass Corporation is considering the purchase of a new machine costing $380,000. 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

$20,000

$95,000

2

20,000

95,000

3

20,000

95,000

4

20,000

95,000

5

20,000

95,000

 

 

 

The net present value for this investment is: A. Positive $20,140B. Negative $20,140C. Positive $19,875D. Negative $19,875

109. 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

1.690

3

2.673

2.487

2.402

4

3.465

3.170

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 at the end of each of the next two years, assuming an earnings rate of 6%? A. $27,495B. $26,040C. $30,000D. $25,350

110. 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

1.690

3

2.673

2.487

2.402

4

3.465

3.170

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 one year from today, assuming an earnings rate of 12%? A. $7,544B. $7,120C. $7,272D. $7,144

 

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