Question :
103.A company considering a 5-year project. The company plans to : 1236806
103.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:
10%3.7908
12%3.6048
14%3.4331
A.The project should be accepted.
B.The project should be rejected because it earns less than 10%.
C.The project earns more than 10% but less than 12%. At a hurdle rate of 12%, the project should be rejected.
D.Only 9% is acceptable.
E.Only 10% is acceptable.
104.Tressor Company is considering a 5-year project. The company plans to invest $90,000 now and it forecasts cash flows for each year of $27,000. The company requires that investments yield a discount rate of at least 14%. Selected factors for a present value of an annuity of 1 for five years are shown below:
10%3.7908
12%3.6048
14%3.4331
A.The project should be accepted because it will earn more than 14%.
B.The project should be accepted because it will earn more than 10%.
C.The project will earn more than 12% but less than 14%. At a hurdle rate of 14%, the project should be rejected.
D.The project should be rejected because it will earn less than 14%.
E.The project should be rejected because it will not earn exactly 14%.
105.Wheeler 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 Wheeler 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.
106.Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10; direct labor, $14, variable overhead, $3 and fixed overhead, $8. An outside supplier has offered to sell the product to Axle for $32. Compute the net incremental cost or savings of buying the component.
A.$5.00 savings per unit.
B.$3.00 cost per unit.
C.$0 cost or savings per unit.
D.$5.00 cost per unit.
E.$3.00 savings per unit.
107.Walters 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 Deluxe and 6,000 units of Super. The selling price of Deluxe and Super 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.
108.Cornish Company had the following results of operations for the past year:
A.Decrease by $4,500.
B.Increase by $4,500.
C.Decrease by $300.
D.Increase by $13,500.
E.Increase by $15,000.
109.Elliot Company can sell all of its products A and Z that it can produce, but it has limited production capacity. It can produce 8 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 Elliot 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.
110.A new manufacturing machine is expected to cost $278,000, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation. Compute the payback period for the purchase.
A.8.7 years.
B.3.8 years.
C.4.2 years.
D.7.3 years.
E.5.4 years.
111.A new manufacturing machine is expected to cost $278,000, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation. Compute the accounting rate of return for the investment.
A.22.7%.
B.23.4%.
C.46.9%.
D.12.2%.
E.24.5%.
112.Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year.
Annual Net Cash Flows
Year 1$40,000
Year 2$40,000
Year 3$35,000
Year 4$35,000
Year 5$30,000
Compute the payback period for this investment. (Round to two decimal places.)
A.2.85 years.
B.2.57 years.
C.3.00 years.
D.2.50 years.
E.3.62 years.
