Question : 79. The management of Arkansas Corporation considering the purchase of a : 1227062

 

 

79. The management of Arkansas 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 Cash   Flow  

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 net present value for this investment is: A. positive $36,400B. positive $55,200C. Negative $16,170D. Negative $126,800

 

80. The management of California Corporation is considering the purchase of a new machine costing $400,000. 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 Cash     Flow 

1

$100,000

$180,000

2

40,000

120,000

3

20,000

100,000

4

10,000

90,000

5

10,000

90,000

 

 

 

The present value index for this investment is: A. .88B. 1.45C. 1.14D. .70

 

81. The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation: 

Year

Income fromOperations

Net Cash    Flow 

1

$18,750

$93,750

2

18,750

93,750

3

18,750

93,750

4

18,750

93,750

5

18,750

93,750

 

 

 

The cash payback period for this investment is: A. 4 yearsB. 5 yearsC. 20 yearsD. 3 years

 

82. The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation: 

Year

Income fromOperations

Net Cash    Flow 

1

$18,750

$93,750

2

18,750

93,750

3

18,750

93,750

4

18,750

93,750

5

18,750

93,750

 

 

 

The average rate of return for this investment is: A. 5%B. 10%C. 25%D. 15%

 

83. The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation: 

Year

Income fromOperations

Net Cash    Flow 

1

$18,750

$93,750

2

18,750

93,750

3

18,750

93,750

4

18,750

93,750

5

18,750

93,750

 

 

 

The net present value for this investment is: A. Negative $118,145B. Positive $118,145C. Positive $19,875D. Negative $19,875

 

84. The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation: 

Year

Income fromOperations

Net Cash    Flow 

1

$18,750

$93,750

2

18,750

93,750

3

18,750

93,750

4

18,750

93,750

5

18,750

93,750

 

 

 

The present value index for this investment is: A. 1.00B. .95C. 1.25D. 1.05

 

85. Motel Corporation is analyzing a capital expenditure that will involve a cash outlay of $208,240. Estimated cash flows are expected to be $40,000 annually for seven years. The present value factors for an annuity of $1 for 7 years at interest of 6%, 8%, 10%, and 12% are 5.582, 5.206, 4.868, and 4.564, respectively. The internal rate of return for this investment is: A. 10%B. 6%C. 12%D. 8%

 

86. Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay of $104,904. Estimated cash flows are expected to be $36,000 annually for four years. The present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%, and 15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this investment is: A. 2%B. 2.4%C. 14%D. 3%

 

87. Below is a table for the 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

5

.747

.621

.567

 

 

 

 

Below is a table for the present value of an annuity of $1 at compound interest. 

Year

6%

10%

12%

1

.943

.909

.893

2

1.833

1.736

1.690

3

2.673

2.487

2.402

4

3.465

  3.170

3.037

5

4.212

3.791

3.605

 

 

 

 

Using the tables above, what would be the present value of $15,000 (rounded to the nearest dollar) to be received three years from today, assuming an earnings rate of 10%? A. $13,500B. $11,265C. $6,031D. $37,305

 

88. Below is a table for the 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

5

.747

.621

.567

 

 

 

 

Below is a table for the present value of an annuity of $1 at compound interest. 

Year

6%

10%

12%

1

.943

.909

.893

2

1.833

1.736

1.690

3

2.673

2.487

2.402

4

3.465

  3.170

3.037

5

4.212

3.791

3.605

 

 

 

 

Using the tables above, what would be the present value of $10,000 (rounded to the nearest dollar) to be received two years from today, assuming an earnings rate of 6%? A. $8,900B. $7,144C. $5,696D. $5,088