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Question;60. (Ignore income taxes in this problem.) Finlay Corporation is investigating;automating a process by purchasing a machine for \$225,000 that would have a 9;year useful life and no salvage value. By automating the process, the company;would save \$54,000 per year in cash operating costs. The new machine would;replace some old equipment that would be sold for scrap now, yielding \$24,000.;The annual depreciation on the new machine would be \$25,000. The simple rate of;return on the investment is closest to;A. 24.0% B.;12.9% C. 11.1% D. 14.5%;14-25;A. 17.3%;B. 16.7%;C.;16.1%;D.;32.7%;(Ignore;income taxes in this problem.) Jones and Company has just purchased a new piece;of equipment, the cost characteristics of which are given below;The company uses a required rate of return of 10% and depreciates;equipment using the straight-line method.;63. The payback period for the investment is: A. 5 years;B. 15 years C. 2 years;D. 7.143 years;64. The simple rate of return for the investment (rounded to the;nearest tenth of a percent) is: A. 20.0%;B. 13.3% C.;18.0% D. 10.0%;14-26;66. The internal rate of return of the investment is closest to;A.;16%;B.;18%;C. 20%;D.;22%;(Ignore;income taxes in this problem.) Isomer Industrial Training Corporation is;considering the purchase of new presentation equipment at a cost of \$150,000.;The equipment has an estimated useful life of 10 years with an expected salvage;value of zero. The equipment is expected to generate net cash inflows of;\$35,000 per year in each of the 10 years. Isomer's discount rate is 16%. Isomer;uses the straight-line method of depreciation for its assets.;67. What is the net present value of the presentation equipment? A.;\$950;B. \$19,155 C. \$(36,500) D. \$(53,340);68. Between what two percents does the internal rate of return of the;presentation equipment fall?;A. 5% and;6% B. 8% and 10% C. 14% and 16% D. 18% and 20%;14-27;70. What is the simple rate of return of the presentation;equipment?;A.;13.3%;B.;22.7%;C. 23.3%;D.;26.0%;(Ignore income taxes in this;problem.) Treads Corporation is considering the replacement of an old machine;that is currently being used. The old machine is fully depreciated but can be;used by the corporation for five more years. If Treads decides to replace the;old machine, Picco Company has offered to purchase the old machine for \$60,000.;The old machine would have no salvage value in five years.;The new machine would be;acquired from Hillcrest Industries for \$1,000,000 in cash. The new machine has;an expected useful life of five years with no salvage value. Due to the;increased efficiency of the new machine, estimated annual cash savings of;\$300,000 would be generated.;Treads Corporation uses a discount rate of 12%.;71. The net present value of the project is closest to;A.;\$171,000;B. \$136,400;C.;\$141,500;D.;\$560,000;14-28;(Ignore income taxes in this problem.) Steinmann Inc. is;considering the acquisition of a new machine that costs \$410,000 and has a;useful life of 5 years with no salvage value. The incremental net operating;income and incremental net cash flows that would be produced by the machine;are;73. If the discount rate is 14%, the net present value of the;investment is closest to: A. \$410,000;B. \$239,000;C. \$446,002 D. \$36,141;74.;The payback period of this;investment is closest to;A.;2.9 years;B.;3.2 years;C. 4.8 years;D.;5.0 years;14-29;75. If the discount rate is 18%, the net present value of the;investment is closest to: A. \$24,418;B. \$177,000;C. \$224,418 D. \$65,566;76.;The payback period of this;investment is closest to;A.;2.8 years;B. 2.6 years;C.;3.1 years;D.;5.0 years;14-30;The working capital needed now would be released at the end of the;seven years for investment elsewhere.;77. The present value of the salvage value to be received in seven;years is: A. \$14,800;B. \$12,560 C. \$14,160 D. \$152,480;78. The present value of the stream of annual net cash inflows from;operations is: A. \$228,720;B. \$420,000;C. \$209,880 D. \$150,640;79. Consider only the cash flows for the third year. The present value;of the net cash flows (cash inflows less cash outflows) for this year only is;A. \$6,090 B. \$36,540 C. \$8,720 D. \$30,450;14-31;(Ignore;income taxes in this problem.) The Wisbley Company is contemplating the;purchase of a helicopter for its executives to use in their business trips.;This helicopter could be either purchased or leased from the manufacturer. The;useful life of the helicopter is four years.;Data concerning these two alternatives follow;If the helicopter is leased, it would be returned to the;manufacturer in four years. Wisbley's required rate of return is 22%.;81. The present value of all the cash outflows for rental;payments, if the helicopter is leased, would be;A.;\$(647,250);B. \$(623,500);C.;\$(716,000);D.;\$(510,500);14-32;83. The present value of the salvage value of the helicopter, if the;helicopter is purchased, would be;A. \$121,770;B. \$162,360 C. \$114,210 D. \$99,900;84. The incremental net present value in favor of leasing rather than;purchasing is (rounded off to the nearest hundred dollars);A. \$78,300;B. \$65,100 C. \$188,100 D. \$132,600;14-33;This equipment is expected to have a useful life of 6 years. At;the end of the sixth year the working capital would be released for use;elsewhere. The company's discount rate is 10%.;85. The present value of all future operating cash inflows is closest;to: A. \$480,000;B. \$452,300;C. \$348,400 D. \$278,700;86. The present value of the net cash flows (all cash inflows less all;cash outflows) occurring during year 4 is;A. \$40,000;B. \$27,320 C. \$54,640 D. \$42,790;87. The present value of the net cash flows (all cash inflows less all;cash outflows) occurring during year 6 is closest to;A. \$270,000;B. \$195,900 C. \$107,200 D. \$152,300;14-34;88. The present value of the annual cost savings of \$54,000 is closest;to: A. \$14,202;B. \$946,093;C. \$486,000 D. \$248,778;89.;The net present value of the;proposed project is closest to;A.;\$16,778;B. -\$11,228;C.;-\$21,222;D.;-\$42,700;(Ignore;income taxes in this problem.) The management of Lassonde Corporation is;considering the purchase of a machine that would cost \$290,000, would last for;9 years, and would have no salvage value. The machine would reduce labor and;other costs by \$56,000 per year. The company requires a minimum pretax return;of 8% on all investment projects.;90. The present value of the annual cost savings of \$56,000 is;closest to;A.;\$504,000;B.;\$349,832;C. \$175,003;D.;\$699,316

Paper#50040 | Written in 18-Jul-2015

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