Question :
11) What the net present value of the investment, assuming : 1211994
11) What is the net present value of the investment, assuming the required rate of return is 18%? Would the hospital want to purchase the new machine?
A) $33,910; yes
B) $(46,650); no
C) $(46,650); yes
D) $50,800; yes
12) In using the net present value method, only projects with a zero or positive net present value are acceptable because ________.
A) the return from these projects equals or exceeds the cost of capital
B) a positive net present value on a particular project guarantees company profitability
C) the company will be able to pay the necessary payments on any loans secured to finance the project
D) it results in high payback period
13) Which of the following is also called required rate of return?
A) hurdle rate
B) total cost rate
C) variance rate
D) predetermined overhead rate
14) Which of the following projects is rejected on the basis of net present value method?
A) Project A with an NPV of $5,000
B) Project B with an NPV of $(7,000)
C) Project C with an NPV of $15,000
D) Project D with an NPV of $500
15) An annuity is ________.
A) a noncash expense
B) a series of equal cash flows at equal time intervals
C) an investment product whose funds are invested in the stock market
D) a rate at which an investment’s present value of all expected cash inflows equals the present value of project’s expected cash outflows.
16) The net present value method focuses on ________.
A) cash flows and discount rate
B) inventory cost and cost of capital
C) working capital and cost of capital
D) operating income and required rate of return
17) If the net present value for a project is positive, ________.
A) the project should be accepted
B) its internal rate of return is more than its cost of capital
C) its expected rate of return is below the required rate of return
D) its internal rate of return is less than its cost of capital
18) Concose Park Department is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $330,000. The annual cost savings if the new machine is acquired will be $85,000. The machine will have a 5-year life, at which time the terminal disposal value is expected to be $32,000. Concose Park Department is assuming no tax consequences. If Concose Park Department has a required rate of return of 11%, which of the following is closest to the present value of the project?
A) $8,245
B) $24,836
C) $3,136
D) $15,840
19) Forge Company wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual cash inflows of $120,000. The required rate of return is 10% and the current machine is expected to last for four years. What is the maximum dollar amount the company would be willing to spend for the machine, assuming its life is also four years? Income taxes are not considered.
A) $273,500
B) $460,800
C) $355,950
D) $380,280
20) The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $380,000. The investment is expected to generate $125,000 in annual cash flows for a period of four years. The required rate of return is 12%. The old machine can be sold for $20,000. The machine is expected to have zero value at the end of the four-year period. What is the net present value of the investment? Would the company want to purchase the new machine? Income taxes are not considered.
A) $19,750; yes
B) $35,775; no
C) $360,000; yes
D) $163,005; no
