Question : 35) Soda Manufacturing Company provides vending machines for soft-drink manufacturers. : 1217113

35) Soda Manufacturing Company provides vending machines for soft-drink manufacturers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of three years and the new equipment has a value of $52,650 with a three-year life. The expected additional cash inflows are $25,000 per year. What is the internal rate of return?

A) 20%

B) 16%

C) 10%

D) 8%

36) Crystal Manufacturing Company provides glassware machines for major department store retailers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of five years and the new equipment has a value of $117,320 with a five-year life. The expected additional cash inflows are $35,000 per year. What is the internal rate of return?

A) 10%

B) 12%

C) 15%

D) 20%

37) Springtime Flower Company provides flowers and other nursery products for decorative purposes in medium to large sized restaurants and businesses. The company has been investigating the purchase of a new specially equipped van for deliveries. The van has a value of $62,755 with a seven-year life. The expected additional cash inflows are $13,750 per year. What is the internal rate of return?

A) 10%

B) 12%

C) 15%

D) 20%

38) An important advantage of the net present value method of capital budgeting over the internal rate-of-return method is:

A) the net present value method is expressed as a percentage

B) the net present values of individual projects can be added to determine the effects of accepting a combination of projects

C) There is no advantage.

D) Both A and B are correct.

39) In situations where the required rate of return is NOT constant for each year of the project, it is advantageous to use:

A) the adjusted rate-of-return method

B) the internal rate-of-return method

C) the net present value method

D) sensitivity analysis

40) A “what-if” technique that examines how a result will change if the original predicted data are NOT achieved or if an underlying assumption changes is called:

A) sensitivity analysis

B) net present value analysis

C) internal rate-of-return analysis

D) adjusted rate-of-return analysis

41) Investment A requires a net investment of $1,600,000. The required rate of return is 12% for the four-year annuity. What are the annual cash inflows if the net present value equals 0? (rounded)

A) $378,966

B) $526,836

C) $549,696

D) $591,466

42) The minimum annual acceptable rate of return on an investment is the:

A) accrual accounting rate of return

B) hurdle rate

C) internal rate of return

D) net present value

43) Upper Darby Park Department is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $432,576. The annual cost savings if the new machine is acquired will be $120,000. The machine will have a 5-year life, at which time the terminal disposal value is expected to be zero. Upper Darby Park Department is assuming no tax consequences. What is the internal rate of return for Upper Darby Park Department?

A) 10%

B) 12%

C) 14%

D) 16%

44) The Required Rate of Return (RRR) is set externally by creditors as the interest rate on long term liabilities.