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Question;A company uses the net present value method to evaluate planned capital expenditures. Everything else being equal, the lower the required rate of return they use, the ____ will be the net present value.A. higherB. lowerC. identicalD. cannot be determinedEquipment is purchased at a cost of $39,000. As a result, annual cash revenues will increase by $20,000, annual cash operating expenses will increase by $7,000, straight-line depreciation is used, the asset has a ten-year life, the salvage value is $3,000. Assuming a tax bracket of 34%, determine the accounting rate of return? (round to the nearest %)A. 13%B. 16%C. 27%D. 33%A company uses the net present value methodology in making capital expenditure decisions. In making a decision where they have to choose among two pieces of equipment, which of the following pieces of information will be considered irrelevantA. initial cost of each machineB. estimated life of each machineC. MACRS DepreciationD. Cash flow generated by each machine during the estimated life of the machineShirt Co. wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual net cash inflows of $30,000, have a useful life of 8 years, and an estimated salvage value of $10,000. If Shirt Co. has a required rate of return of 12%, the maximum amount they will be willing to spend for this machine is:A. $149,040B. $153,080C. $198,720D. $300,000Co. X has gathered the following estimates:Machine A Machine BCost $600,000 $600,000Life 5 yrs 5 yrsNet Cash Inflow:Yr 1 i$100,000 $500,000Yr 2 $200,000 $400,000Yr 3 $300,000 $300,000Yr 4 $400,000 $200,000Yr 5 $500,000 $100,000Co. X uses the net present value method to evaluate capital expenditures. Which of the following two machines has the higher net present value?A. Machine AB. Machine BC. they are the sameD. Cannot be determined from the information providedA company uses the net present value methodology in making capital expenditure decisions. In making a decision where they have to choose among two pieces of equipment, which of the following pieces of information will be considered irrelevantA. initial cost of each machineB. estimated life of each machineC. MACRS DepreciationD. Cash flow generated by each machine during the estimated life of the machine

 

Paper#50003 | Written in 18-Jul-2015

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