Question :
106.
Cleaners, Inc. considering purchasing equipment costing $60,000 with a 6-year : 1311936
106.
Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return.
Present Value of an Annuity of 1
Period 8% 9% 10% 11% 12% 15%
64.6234.4864.3554.2314.1113.784
What is the approximate net present value of this investment?
a.$27,600
b.$3,583
c.$1,772
d.$5,496
107.
Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return.
Present Value of an Annuity of 1
Period 8% 9% 10% 11% 12% 15%
64.6234.4864.3554.2314.1113.784
What is the approximate profitability index associated with this equipment?
a.1.23
b.1.03
c.1.06
d..73
108.
Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return.
Present Value of an Annuity of 1
Period 8% 9% 10% 11% 12% 15%
64.6234.4864.3554.2314.1113.784
What is the approximate internal rate of return for this investment?
a.9%
b.10%
c.11%
d.12%
109.
Present Value of an Annuity of 1
Periods 8% 9% 10%
1.926.917.909
21.7831.7591.736
32.5772.5312.487
A company has a minimum required rate of return of 9%. It is considering investing in a project that costs $210,000 and is expected to generate cash inflows of $84,000 at the end of each year for three years. The net present value of this project is
a.$212,604.
b.$42,000.
c.$21,261.
d.$2,604.
110.
Present Value of an Annuity of 1
Periods 8% 9% 10%
1.926.917.909
21.7831.7591.736
32.5772.5312.487
A company has a minimum required rate of return of 10%. It is considering investing in a project that costs $50,000 and is expected to generate cash inflows of $25,000 at the end of each year for three years. The profitability index for this project is
a..80.
b.1.00.
c.1.24.
d.1.27.
111.
Present Value of an Annuity of 1
Periods 8% 9% 10%
1.926.917.909
21.7831.7591.736
32.5772.5312.487
A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $91,116 and is expected to generate cash inflows of $36,000 each year for three years. The approximate internal rate of return on this project is
a.8%.
b.9%.
c.10%.
d.less than the required 8%.
112.
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
Project SoupProject Nuts
Initial investment$400,000$600,000
Annual net income30,00046,000
Net annual cash inflow110,000146,000
Estimated useful life5 years6 years
Salvage value-0–0-
The company requires a 10% rate of return on all new investments.
Present Value of an Annuity of 1
Periods 9% 10% 11% 12%
53.8903.7913.6963.605
64.4864.3554.2314.111
The cash payback period for Project Soup is
a.13.3 years.
b.6.7 years.
c.5.0 years.
d.4.1 years.
113.
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
Project SoupProject Nuts
Initial investment$400,000$600,000
Annual net income30,00046,000
Net annual cash inflow110,000146,000
Estimated useful life5 years6 years
Salvage value-0–0-
The company requires a 10% rate of return on all new investments.
Present Value of an Annuity of 1
Periods 9% 10% 11% 12%
53.8903.7913.6963.605
64.4864.3554.2314.111
The net present value for Project Nuts is
a.$635,830.
b.$200,330.
c.$100,000.
d.$35,830.
114.
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
Project SoupProject Nuts
Initial investment$400,000$600,000
Annual net income30,00046,000
Net annual cash inflow110,000146,000
Estimated useful life5 years6 years
Salvage value-0–0-
The company requires a 10% rate of return on all new investments.
Present Value of an Annuity of 1
Periods 9% 10% 11% 12%
53.8903.7913.6963.605
64.4864.3554.2314.111
The internal rate of return for Project Nuts is approximately
a.11%.
b.12%.
c.10%.
d.9%.
115.
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
Project SoupProject Nuts
Initial investment$400,000$600,000
Annual net income30,00046,000
Net annual cash inflow110,000146,000
Estimated useful life5 years6 years
Salvage value-0–0-
The company requires a 10% rate of return on all new investments.
Present Value of an Annuity of 1
Periods 9% 10% 11% 12%
53.8903.7913.6963.605
64.4864.3554.2314.111
The annual rate of return for Project Soup is
a.7.5%.
b.15.0%.
c.27.5%.
d.55%.