Question : 81. The following present value factors provided for use in this : 1225698

81. The following present value factors are provided for use in this problem.

Norman Co. wants to purchase a machine for $40,000, but needs to earn an 8% return. The expected year-end net cash flows are $12,000 in each of the first three years, and $16,000 in the fourth year. What is the machine’s net present value (round to the nearest whole dollar)? 

A. $(9,075).

B. $2,685.

C. $42,685.

D. $(28,240).

E. $52,000.

82. Saxon Manufacturing is considering purchasing two machines. Each machine costs $9,000 and will produce cash flows as follows:

Saxon Manufacturing uses the net present value method to make the decision, and it requires a 15% annual return on its investments. The present value factors of 1 at 15% are: 1 year, 0.8696; 2 years, 0.7561; 3 years, 0.6575. Which machine should Saxon purchase? 

A. Only Machine A is acceptable.

B. Only Machine B is acceptable.

C. Both machines are acceptable, but A should be selected because it has the greater net present value.

D. Both machines are acceptable, but B should be selected because it has the greater net present value.

E. Neither machine is acceptable.

83. A company is considering the purchase of new equipment for $45,000. The projected after-tax net income is $3,000 after deducting $15,000 of depreciation. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of 1 for various periods follows:

What is the net present value of this machine assuming all cash flows occur at year-end? 

A. $(1,768)

B. $3,000

C. $15,000

D. $18,000

E. $43,232

84. A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. If a table of present values of 1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%? 

A. $118,855

B. $583,676

C. $629,788

D. $705,391

E. $1,918,855

85. The rate that yields a net present value of zero for an investment is the: 

A. Internal rate of return.

B. Accounting rate of return.

C. Net present value rate of return.

D. Zero rate of return.

E. Payback rate of return.

86. A company is considering a 5-year project. The company plans to invest $60,000 now and it forecasts cash flows for each year of $16,200. The company requires a hurdle rate of 12%. Calculate the internal rate of return to determine whether it should accept this project. Selected factors for a present value of an annuity of 1 for five years are shown below:

A. The project should be accepted.

B. The project should be rejected because it earns more than 10%.

C. The project earns more than 10% but less than 12%. If the hurdle rate is 12%, the project should be rejected.

D. Only 9% is acceptable.

E. Only 10% is acceptable.

87. Axle Company can produce a product that incurs the following costs per unit: direct materials, $10; direct labor, $24, and overhead, $16. An outside supplier has offered to sell the product to Axle for $45. If Axle buys from the supplier, it will still incur 45% of its overhead cost. Compute the net incremental cost or savings of buying. 

A. $4.00 savings per unit.

B. $4.00 cost per unit.

C. $2.20 cost per unit.

D. $3.80 cost per unit.

E. $2.20 savings per unit.

88. Barnes manufactures a specialty food product that can currently be sold for $22 per unit and has 20,000 units on hand. Alternatively, it can be further processed at a cost of $12,000 and converted into 12,000 units of Exceptional and 6,000 units of Premium. The selling price of Exceptional and Premium are $30 and $20, respectively. The incremental net income of processing further would be: 

A. $40,000.

B. $28,000.

C. $18,000.

D. $44,000.

E. $12,000.

89. Trescott Company had the following results of operations for the past year:

A foreign company (whose sales will not affect Trescott’s market) offers to buy 3,000 units at $17.00 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $500 and selling and administrative costs by $1,000. If Trescott accepts the offer, its profits will: 

A. Decrease by $4,500.

B. Increase by $4,500.

C. Decrease by $300.

D. Increase by $13,500.

E. Increase by $15,000.

90. Sherman Company can sell all of its products A and Z that it can produce, but it has limited production capacity. It can produce 6 units of A per hour or 10 units of Z per hour, and it has 20,000 production hours available. Contribution margin per unit is $12 for A and $10 for Z. What is the most profitable sales mix for this company? 

A. 84,000 units of A and 60,000 units of Z.

B. 48,000 units of A and 80,000 units of Z.

C. 60,000 units of A and 100,000 units of Z.

D. 120,000 units of A and 0 units of Z.

E. 0 units of A and 200,000 units of Z.