Question :
61. Grant Manufacturing considering investing in equipment that costs $70,000. The : 1291739
61. Grant Manufacturing is considering investing in equipment that costs $70,000. The equipment would be depreciated using the straight-line method with no half-year convention over seven years and have no salvage value. If the company has a 40 percent income tax rate and desires an after-tax rate of return of 14 percent on investments, the total present value of the depreciation tax shield is: A. $42,883.B. $27,972.C. $25,730.D. $17,153.
62. Triangle Catering is considering investing in new equipment that costs $100,000. The equipment would be depreciated using the straight-line method with no half-year convention over five years and have no salvage value. If the company has a 35 percent income tax rate and desires an after-tax rate of return of 15 percent on investments, the total present value of the depreciation tax shield is: A. $67,044.B. $43,579.C. $23,465.D. $49,720.
63. The length of time needed for a long-term project to recapture its initial investment amount is called the: A. discount period.B. internal rate of return.C. present value.D. payback period.
64. Which of the following does not consider the time value of money? A. Net present valueB. Profitability indexC. Payback periodD. Internal rate of return
65. Hazir Products accepts capital investment projects with a payback period of four years or less. Under this condition, which of the following projects would be acceptable?
Project #1
Project #2
Annual cash flows
$ 4,000
$12,000
Initial investment
20,000
36,000
A. Project #1 only.B. Project #2 only.C. Both Project #1 and Project #2.D. Neither Project #1 nor Project #2.
66. Lee Enterprises accepts capital investment projects with a payback period of five years or less. Under this condition, which of the following projects would be acceptable?
Project #1
Project #2
Annual cash flows
$ 25,000
$ 40,000
Initial investment
125,000
160,000
A. Project #1 only.B. Project #2 only.C. Both Project #1 and Project #2.D. Neither Project #1 nor Project #2.
67. Bluefield Inc. is considering a project that will require an initial investment of $75,000 and is expected to generate future cash flows of $15,000 for years 1 through 3 and $10,000 for years 4 through 8. The project’s payback period is: A. 6 years.B. 5 years.C. 4 years.D. 2.67 years.
68. Chester Manufacturing is considering a project that will require an initial investment of $50,000 and is expected to generate future cash flows of $20,000 for years 1 through 3 and $10,000 for years 4 through 7. The project’s payback period is: A. 2.5 years.B. 7 years.C. 1.67 years.D. 3.33 years.
69. Putter Inc. requires all capital investment projects to have a payback period of 4 years or less. Putter is currently considering an equipment purchase that has an initial cost of $80,000. The equipment is expected to have a six year life and a salvage value of $4,000. Assuming cash flows are equal, what does the annual cash flow generated by the equipment need to be in order to meet the payback period requirements? A. $19,000B. $13,333C. $21,000D. $20,000
70. Vinson Manufacturing requires all capital investment projects to have a payback period of 5 years or less. Vinson is currently considering an equipment purchase that has an initial cost of $90,000. The equipment is expected to have a ten year life and a salvage value of $5,000. Assuming cash flows are equal, what does the annual cash flow generated by the equipment need to be in order to meet the payback period requirements? A. $18,000B. $19,000C. $17,000D. $9,000
