Question :
81. The rate of earnings 10% and the cash to be : 1239644
81. The rate of earnings is 10% and the cash to be received in three years is $10,000. Determine the present value amount, using the following partial table of 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
A. $13,316B. $6,830C. $7,510D. $8,260
82. Using the following partial table of present value of $1 at compound interest, determine the present value of $20,000 to be received four years hence, with earnings at the rate of 10% a year:
Year
6%
10%
12%
1
.943
.909
.893
2
.890
.826
.797
3
.840
.751
.712
4
.792
.683
.636
A. $13,660B. $12,720C. $15,840D. $10,400
83. When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. If the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a(n): A. average rate of returnB. consumer price indexC. present value indexD. price-level index
84. Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals? A. Internal rate of returnB. Cash paybackC. Net present valueD. Average rate of return
85. A series of equal cash flows at fixed intervals is termed a(n): A. present value indexB. price-level indexC. net cash flowD. annuity
86. The present value index is computed using which of the following formulas? A. Amount to be invested/Average rate of returnB. Total present value of net cash flow/Amount to be investedC. Total present value of net cash flow/Average rate of returnD. Amount to be invested/Total present value of net cash flow
87. Hazard Company is considering the acquisition of a machine that costs $525,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual cash flow of $150,000, and annual operating income of $87,500. What is the estimated cash payback period for the machine? A. 3 yearsB. 4.3 yearsC. 3.5 yearsD. 5 years
88. The expected average rate of return for a proposed investment of $8,000,000 in a fixed asset, using straight line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $12,000,000 is: A. 15%B. 12%C. 40%D. 7.5%
89. The present value factor for an annuity of $1 is determined using which of the following formulas? A. Amount to be invested/Annual average net incomeB. Annual net cash flow/Amount to be investedC. Annual average net income/Amount to be investedD. Amount to be invested/Equal annual net cash flows
90. The management of Nebraska 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
40,000
100,000
4
10,000
90,000
5
10,000
120,000
The cash payback period for this investment is: A. 5 yearsB. 4 yearsC. 2 yearsD. 3 years
