Question : 71. Hazir Products accepts capital investment projects with a payback period : 1295633

71. Hazir Products accepts capital investment projects with a payback period of four years or less. Under this condition, which of the following projects would be acceptable? 

Project #1

Project #2

Annual cash flows

$ 4,000

$ 12,000

Initial investment

20,000

36,000

 A. Project #1 only.B. Project #2 only.C. Both Project #1 and Project #2.D. Neither Project #1 nor Project #2.

72. Lee Enterprises accepts capital investment projects with a payback period of five years or less. Under this condition, which of the following projects would be acceptable? 

Project #1

Project #2

Annual cash flows

$ 25,000

$ 40,000

Initial investment

125,000

160,000

 A. Project #1 only.B. Project #2 only.C. Both Project #1 and Project #2.D. Neither Project #1 nor Project #2.

73. Bluefield Inc. is considering a project that will require an initial investment of $20,000 and is expected to generate future cash flows of $5,000 for years 1 through 3 and $2,500 for years 4 through 6. The project’s payback period is: A. 6 yearsB. 5 yearsC. 4 yearsD. 2.67 years

74. Chester Manufacturing is considering a project that will require an initial investment of $50,000 and is expected to generate future cash flows of $20,000 for years 1 through 3 and $10,000 for years 4 through 7. The project’s payback period is: A. 2.5 yearsB. 7 yearsC. 1.67 yearsD. 3.33 years

75. Putter Inc. requires all capital investment projects to have a payback period of 4 years or less. Putter is currently considering an equipment purchase that has an initial cost of $80,000. The equipment is expected to have a six year life and a salvage value of $4,000. Assuming cash flows are equal, what does the annual cash flow generated by the equipment need to be in order to meet the payback period requirements? A. $19,000B. $13,333C. $21,000D. $20,000

76. Vinson Manufacturing requires all capital investment projects to have a payback period of 5 years or less. Vinson is currently considering an equipment purchase that has an initial cost of $90,000. The equipment is expected to have a ten year life and a salvage value of $5,000. Assuming cash flows are equal, what does the annual cash flow generated by the equipment need to be in order to meet the payback period requirements? A. $18,000B. $19,000C. $17,000D. $  9,000

77. Valeria Products is considering the purchase of a new machine costing $500,000. The machine is expected to reduce annual operating costs by $90,000 and will be depreciated using the straight-line method (with no half-year convention) over ten years with no salvage value at the end of its useful life. Assuming a 40 percent income tax rate, the machine’s payback period is: A. 5.56 yearsB. 6.76 yearsC. 9.26 yearsD. 3.57 years

78. Clinton Inc. is considering the purchase of a new equipment costing $200,000. The equipment is expected to reduce annual operating costs by $70,000 and will be depreciated using the straight-line method (with no half-year convention) over five years with no salvage value at the end of its useful life. Assuming a 40 percent income tax rate, the equipment’s payback period is: A. 2.44 yearsB. 2.86 yearsC. 3.45 yearsD. 4.76 years