Question : 115.You will need $12,000 at the end of each of : 1302833

115.You will need $12,000 at the end of each of the next four years. If an interest rate of 6% is appropriate, how much must you deposit today to receive these payments?

A.$41,581

B.$2,880

C.$50,880

D.$38,021

116.Calculate the present value of an annuity of $42,000 per year for each of the next 15 years. Use a required rate of return of 6%.

A.$262,899

B.$163,449

C.$166,468

D.$407,914

117.Sanders Company has a 15% minimum required rate of return. What is the present value of the expected operating cash flows of $300,000 per year for each of the next ten years?

A.$2,608,000

B.$741,600

C.$2,281,830

D.$1,505,631

118.On January 1, 2014, Sanford, Inc. plans to purchase a machine for $68,000 that has an estimated salvage value of $12,000, and an estimated life of 4 years. The machine is expected to generate the following cash flows and income over the next 4 years:

2013                2014         2015                      2016

Net income$12,500 $10,300 $13,000 $ 2,000

Operating cash flows  26,500   24,300    27,000 16,000

Sanford’s required rate of return is 9.5%, and the cost of capital is 7.5%. How much is the accounting rate of return?

A.94.50%

B.33.75%

C.23.63%

D.58.63%

119.A project with an initial cost of $314,000 will generate no returns in the first two years of operations, and operating cash flows of $150,000 per year in Years 3, 4, and 5. The required rate of return is 7%. To which amount is the net present value of the project closest?

A.$29,830

B.$343,830

C.$61,900

D.$393,645

120.Which amount is never used as part of the calculation of the annual operating cash flows in a capital budgeting decision?

   Cost savings due to reduced labor with the new asset

   The salvage value of the new asset

   Additional variable overhead costs expected for the new machine

  Additional revenue due to an increased selling price

121.What is IRR?

A.The rate of return that causes the investment to exactly breakeven

B.The rate of return that is the minimum acceptable by the company

C.The rate of return that is equal to the company’s hurdle rate

D.The rate of return that would result in zero net present value of the investment

122.Landy Company is using the internal rate of return method to decide whether to make an investment that will cost $120,000 and which is expected to generate economic resources for 5 years. Landry determines the IRR is 3.12. What information does the IRR provide?

A.Landy expects to earn 3.12% of its investment as cash flows each year the asset is used.

B.Landy expects to earn a 3.12% return over the life of its investment.

C.Landy expects the asset will produce profits equal to 3.12% of the asset’s cost each year.

D.Landy expects to recover its cash over 3.12 years.

123.A project that costs $100,000 yields a cash flow of $18,000 per year for 9 years. How much is the net present value of the project using a 16% cost of capital?

A.$162,000

B.$62,000

C.($17,082)

D.$82,918

124.Why is the depreciation tax shield a component of analyzing investment decisions?

A.Depreciation causes a cash outflow that is added to determine net income.

B.Though no cash was paid out, depreciation was included on the tax return, which caused the company to have to pay taxes on the amount of depreciation.

C.Depreciation lowers income tax expense to be paid, though no cash flow occurs for the depreciation amount.

D.Depreciation creates cash flows that do not appear on the income statement.