Question : 75.Which of the following two methods most likely give the : 1302829

 

 

75.Which of the following two methods are most likely give the same decision of accepting or rejecting a particular project?

A.Net present value and internal rate of return

B.Accounting rate of return and payback period

C.Accounting rate of return and internal rate of return

D.Net present value and accounting rate of return

 

76.Halloran, Inc. is planning a capital investment. The company has a 7.8% required rate of return and a 6.3% cost of capital. Results of its budgeting calculations for three possible investments, each with a 7-year expected useful life and no salvage value, follow:

 

Payback Period MethodNet Present ValueCost

Project 225.2$2,000$125,000

Project 336.9($2,000)62,000

Project 777.5$071,000

 

Which of the reasons below is true concerning the acceptability of a particular project?

               Project 33 incurs a net loss.

               Project 33 generates a return that is less than the required rate of return.

               The cash invested in Project 77 requires an additional half year to recover when compared to Project 22.

               Project 77 will operate at breakeven.

 

77.What are soft benefits?

A.The reverse side of opportunity costs

B.Benefits those are hard to quantify

C.Projected cash flows that are expected to change

D.Considerations needed when a project has a negative internal rate of return

78.Which one of the following is a soft benefit?

A.Decreased time to receive and process customers’ payments

B.Enhanced reputation of the company

C.Depreciation tax shield

D.Reduction in the number of items spoiled during processing

 

79.A project under consideration currently has a negative net present value of $11,600 using a 6% rate of return and an estimated 4-year life. What must be the minimum present value of the soft benefits of this project in order to make it acceptable? (Round the answer to nearest whole dollar.)

A.$12,296

B.$40,195

C.$9,188

D.$3,348

 

80.The following data pertain to an investment proposal:

 

Required equipment investment$124,000

Annual cost savings$52,000

Projected life of investment4 years

Projected salvage value$0

Required rate of return8%

 

The income tax rate is 28%. To which amount is the internal rate of return on this investment closest?

A.12.5%

B.Less than 6%

C.25%

D.2.38%

 

81.The following data pertain to an investment proposal:

 

Required equipment investment$120,200

Annual cost savings$31,700

Projected life of investment5 years

Projected salvage value$0

Required rate of return9%

 

The income tax rate is 30%. To which amount is the internal rate of return on this investment closest?

A.3.8%

B.10.0%

C.9.0%

D.38.1%

 

82.An investment that costs $82,000 is expected to reduce cash operating costs by $27,000 per year for 4 years. Based on the internal rate of return of the investment, should the investment be undertaken if the required rate of return is 9 percent?

A.No, the actual return of 3.04% is less than the required rate of return

B.Yes, because the return of 12% is more than the hurdle rate

C.Yes, because the IRR is more than 30%

D.Yes, because the NPV exceeds the cost by $26,000

 

83.An investment that costs $120,000 is estimated to reduce cash operating costs by $40,000 per year for 4 years. The required rate of return is 10 percent. Determine the payback period assuming an inflation rate of 8 percent on the operating costs saved.

A.About 2.79 years

B.About 2.92 years

C.About 2.66 years

D.About 3 years

 

84.A company is contemplating an investment of $650,000 that is expected to yield a net present value of zero. Which of the following statements is true?

A.The internal rate of return of the investment is zero.

B.The investment will yield an internal rate of return equal to the required rate of return.

C.The investment will yield an accounting rate of return equal to the required rate of return.

D.The investment will result in zero profit.