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charter oak acc102 week 13 test part 1

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Question;?;1. Which of the;following is not an important financial consideration in capital budgeting?;Answer;?;Question 2;0 out of 5;points;2. When using the;net present value method for evaluating an investment, an increase in the;required rate of return will;Answer;?;Question 3;5 out of 5;points;3. Which method of;project selection gives consideration to the time value of money in a capital;budgeting decision?;Answer;?;Question 4;5 out of 5;points;4. Stanley Company;is considering the possibility of investing $800,000 in a special project. This venture will return $200,000 per;year for 12 years in after tax cash flows. Depreciation;on the project will be $100,000 per year using straight-line depreciation. The payback period for the project;is;Answer;?;Question 5;5 out of 5;points;Use the following to answer question 5;Dover Corporation is evaluating a proposal to;invest in a machine costing $72,000. The;machine has an estimated useful life of ten years, and an estimated salvage;value of $10,000. The;machine will increase the company's net income by approximately $6,000 per;year. All;revenue and expenses other than depreciation will be received and paid in;cash.;5. Refer to the;information above. The;payback period of the machine is;Answer;?;Question 6;5 out of 5;points;Use the following to answer questions 6-7;London Corporation is considering investing;$40,000 in equipment to produce a new product. The;useful service life of the equipment is estimated to be ten years, with no;salvage value. Straight-line depreciation is used. The company estimates that production;and sale of the new product will increase net income by $6,000 per year.;6. Refer to the;information above. The;payback period of this investment is;Answer;?;Question 7;5 out of 5;points;7. Refer to the;information above. The;expected rate of return on average investment in this equipment is;Answer;?;Question 8;0 out of 5;points;Use the following to answer questions 8-9;Buckley Company is considering an investment of;$760,000 in heavy equipment which will enable the company to be more;competitive in the construction industry. The;useful service life of the equipment is estimated to be 10 years, with;$60,000 salvage value. Straight-line;depreciation is used. The;company estimates that net income will increase by $82,000 per year as a;result of the company's ability to handle a wider range of projects with the;new equipment.;8. Refer to the;information above. The;payback period for this investment is approximately;Answer;?;Question 9;5 out of 5;points;9. Refer to the;information above. The;expected rate of return on average investment will be approximately;Answer;?;Question 10;5 out of 5;points;Use the following to answer questions 10 - 12;Downhill Gear is planning to expand its product;line, which requires investment of $360,000 in special-purpose machinery. The machinery has a useful life of;six years and no salvage value. The;estimated annual results of offering the new products are as follows;Revenue................................................................................;$400,000;Expenses;(including straight-line depreciation)..........................;(380,000;Increase;in net income...........................................................;$ 20,000;All revenue from the new products and all;expenses (except depreciation) will be received or paid in cash in the same;period as recognized for accounting purposes.;10. Refer to the;information above. The;payback period for this proposed investment is;Answer;?;Question 11;5 out of 5;points;11. Refer to the;information above. The;return on average investment for this proposed investment is;Answer;?;Question 12;5 out of 5;points;12. Refer to the;information above. Compute;the net present value of this proposed investment, using a discount rate of;12%. (An;annuity table shows that the present value of $1 received annually for six;years, discounted at 12%, is 4.111.);Answer

 

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