Question : 136.The internal rate of return factor also the a.annual rate of : 1311939

 

 

136.The internal rate of return factor is also the

a.annual rate of return.

b.profitability index.

c.cash payback period.

d.present value factor for a single amount.

 

 

137.Use the following table,

Present Value of an Annuity of 1

Period  8%   9%  10%

1.926.917.909

21.7831.7591.736

32.5772.5312.487

 

A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $379,650 and is expected to generate cash inflows of $150,000 each year for three years.  The approximate internal rate of return on this project is

a.8%.

b.9%.

c.10%.

d.The IRR on this project cannot be approximated.

 

 

138.A company is considering purchasing a machine that costs $280,000 and is estimated to have no salvage value at the end of its 8-year useful life.  If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used.

 

If the machine is purchased, the annual rate of return expected on this machine is

a.22.1%.

b.44.3%.

c.  9.6%.

d.19.3%.

 

139.A company projects an increase in net income of $135,000 each year for the next five years if it invests $900,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $300,000. What is the annual rate of return on this investment?

a.15.0%

b.22.5%

c.30.0%

d.34.5%

 

 

140.Garza Company is considering buying equipment for $320,000 with a useful life of five years and an estimated salvage value of $16,000. If annual expected income is $28,000, the denominator in computing the annual rate of return is

a.$320,000.

b.$160,000.

c.$168,000.

d.$336,000.

 

 

141.Mussina Company had an investment which cost $250,000 and had a salvage value at the end of its useful life of zero. If Mussina’s expected annual net income is $15,000, the annual rate of return is:

a.  6.0%.

b.10.2%.

c.12.0%.

d.15.0%.

 

 

142.Discounted cash flow techniques include all of the following except

a.profitability index.

b.annual rate of return.

c.internal rate of return.

d.net present value.

 

 

143.Which of the following is based directly on accrual accounting data rather than cash flows?

a.Profitability index

b.Internal rate of return

c.Net present value

d.Annual rate of return

 

 

144.When calculating the annual rate of return, the average investment is equal to

a.(initial investment plus $0) divided by 2.

b.initial investment divided by life of project.

c.initial investment divided by 2.

d.(initial investment plus salvage value) divided by 2.

 

145.A project has an annual rate of return of 15%. The project cost $120,000, has a 5-year useful life, and no salvage value. Straight-line depreciation is used. The annual net income, exclusive of depreciation, was

a.$42,000.

b.$33,000.

c.$47,700.

d.$18,000.

 

 

 

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