Question : *105.When using Microsoft© Excel to calculate the internal rate of : 1302832

*105.When using Microsoft© Excel to calculate the internal rate of return, which item can you safely omit from the function wizard and still calculate the internal rate of return?

A.The initial cash flow

B.The annual cash flows

C.A guess at the internal rate of return

D.None of these answer choices are correct

*106.When using Microsoft© Excel to calculate the net present value, what should you do with the initial cash outflow?

A.Include it in the range of cells in the function

B.Add it to the results from the net present value function

C.Subtract it from the results from the net present value function

D.Discount it at the required rate of return

107.A proposed acquisition of a forklift on January 1, 2014 will cost $86,000. The company has estimated the forklift’s salvage value at the end of its estimated 5-year life to be $21,000. The following amounts have been provided by the management:

20142015201620172018

Net income$7,300$8,700$8,000$5,100$1,400

Operating cash flows$20,300$21,700$21,000$18,100$14,400

The company’s required rate of return is 7.6% and its cost of capital is 5.4%. The income tax rate is 32%. Calculate the payback period.

              4.34 years

              2.82 years

              14.10 years

              4.50 years

*108.In using Microsoft©  Excel to calculate NPV of a capital investment, the following data was input:

ABCDEF

11-1-102010201120122013

2Cash flows−46,00012.60018,50021,50010,500

Which choice is a correct format in which to enter into the NPV wizard if the discount rate is 9.72%?

Rate  Value1Value2Value3Value4Value5

A.9.7212,60018,50021,50010,5000

B.0.97212,60018,50021,50010,5000

C.9.72−46,00012,60018,50021,50010,500

D.0.097212,60018,50021,50010,5000

109.How much will you need to invest today at 10% to have a total of $10,000 accumulated six years from today?

A.$7,050

B.$17,715

C.$5,645

D.$5,584

110.Donaldson, Inc. analyzed an investment and determined that the proposed investment will earn a return of 9.9%. Donaldson’s cost of capital is 6.5% and required rate of return is 9%. Currently, Donaldson’s other investments are earning 11%. Will Donaldson be motivated to accept the investment? A.Yes, because the expected return is greater than the cost of capitalB.No, because it will cause its current return to decline

C.Yes, because the expected return is less than the required rate of returnD.No, because the expected return is less than the required rate of return

111.An investment was analyzed and its NPV was determined to be $2,000. The company’s expected rate of return was 12%. The manager of the division is currently earning 12% on its other investments. This investment will generate losses for the first two years. Which of the following statements best describes what the manager will likely be motivated to do if he is evaluated based on profits?

A.Accept the proposal since the rate of return expected is equal to the rate used for the analysis

B.Accept the proposal since the rate of return on the investment is equal to the required rate of return

C.Do not accept the proposal since the rate of return expected is less than the rate used for the analysis

D.Do not accept the proposal since losses are expected for the first two years

112.Which of the following is a partial solution to motivate managers to accept proposed investments that are projected to generate net losses for the initial years, in spite of the internal rate of return expected to be greater than the required rate of return?

A.Evaluate managers based on long-term profitability

B.Evaluate managers on the short-run expectations of investments

C.Do not evaluate managers based on investments

D.Do not allow managers to make decisions on which investments to accept

113.How much would you have to deposit in the bank today so that you could withdraw $2,000 per year for 4 years earning 8%?

A.$1,470

B.$10,560

C.$5,880

D.$6,624

114.An investment promises a return of $8,000 per year at the end of each of the next six years. How much will you be willing to invest today to receive the $8,000 payments and earn a return of 7%?

A.$31,982

B.$3,360

C.$48,000

D.$38,132