Question : 61. An anticipated purchase of equipment for $400,000, with a useful : 1233946

 

61. An anticipated purchase of equipment for $400,000, with a useful life of 8 years and no residual value, is expected to yield the following annual net incomes and net cash flows: 

Year

Net Income

Net Cash Flow

1

$60,000

$110,000

2

50,000

100,000

3

50,000

100,000

4

40,000

90,000

5

40,000

90,000

6

40,000

90,000

7

40,000

90,000

8

40,000

90,000

 

 

 

What is the cash payback period? A. 5 yearsB. 4 yearsC. 6 yearsD. 3 years

62. Which method for evaluating capital investment proposals reduces the expected future net cash flows originating from the proposals to their present values and computes a net present value? A. Net present valueB. Average rate of returnC. Internal rate of returnD. Cash payback

63. Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis? A. Price-level indexB. Present value factorC. AnnuityD. Present value index

64. An analysis of a proposal by the net present value method indicated that the present value of future cash inflows exceeded the amount to be invested. Which of the following statements best describes the results of this analysis? A. The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.B. The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.C. The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.D. The proposal is undesirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.

65. Which method of evaluating capital investment proposals uses the concept of present value to compute a rate of return? A. Average rate of returnB. Accounting rate of returnC. Cash payback periodD. Internal rate of return

66. Which of the following is a method of analyzing capital investment proposals that ignores present value? A. Internal rate of returnB. Net present valueC. Discounted cash flowD. Average rate of return

67. The methods of evaluating capital investment proposals can be separated into two general groups–present value methods and: A. past value methodsB. straight-line methodsC. cash payback methodsD. methods that ignore present value

68. The rate of earnings is 6% and the cash to be received in one year is $10,000. Determine the present value amount, using the following partial table of 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

 

 

 

 

 A. $9,090B. $9,000C. $9,430D. $8,930

69. Using the following partial table of present value of $1 at compound interest, determine the present value of $20,000 to be received four years hence, with earnings at the rate of 10% a year: 

Year

6%

10%

12%

1

.943

.909

.893

2

.890

.826

.797

3

.840

.751

.712

4

.792

.683

.636

 

 

 

 

 A. $13,660B. $12,720C. $15,840D. $10,400

70. When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. If the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a(n): A. average rate of returnB. consumer price indexC. present value indexD. price-level index