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Question;(Ignore;income taxes in this problem.) Anne, Inc., is considering the purchase of a;machine that would cost $200,000 and would last for 8 years. At the end of 8;years, the machine would have a salvage value of $46,000. The machine would;reduce labor and other costs by $31,000 per year. Additional working capital of;$7,000 would be needed immediately. All of this working capital would be;recovered at the end of the life of the machine. The company requires a minimum;pretax return of 8% on all investment projects.;92. The combined present value of the working capital needed at the;beginning of the project and the working capital released at the end of the;project is closest to;A. -$5,960;B. -$3,220 C. $33,229 D. $0;93.;The net present value of the;proposed project is closest to;A.;-$21,843;B.;$2,997;C. -$413;D.;-$223;14-36;94. Ignoring any salvage value, to the nearest whole dollar how large;would the additional cash flow per year from the intangible benefits have to be;to make the investment in the automated equipment financially attractive?;A. $67,836;B. $423,974 C. $97,600 D. $52,997;95. Ignoring any cash flows from intangible benefits, to the nearest;whole dollar how large would the salvage value of the automated equipment have;to be to make the investment in the automated equipment financially attractive?;A. $67,836 B. $423,974 C. $1,390,079 D. $2,649,838;14-37;96. Ignoring any salvage value, to the nearest whole dollar how large;would the annual cash inflow have to be to make the investment in the equipment;financially attractive?;A. $238,486 B. $54,900 C. $38,158 D. $29,811;97. Ignoring the cash inflows, to the nearest whole dollar how large;would the salvage value of the equipment have to be to make the investment in;the equipment financially attractive? A. $38,158;B. $781,921 C. $1,490,538 D. $238,486;(Ignore;income taxes in this problem.) Bleeker Corporation is investigating buying a;small used aircraft for the use of its executives. The aircraft would have a;useful life of 8 years. The company uses a discount rate of 12% in its capital;budgeting. The net present value of the initial investment and the annual;operating cash cost is -$240,849. Management is having difficulty estimating;the annual benefit of having the aircraft and estimating the salvage value of;the aircraft.;98. Ignoring the annual benefit, to the nearest whole dollar how;large would the salvage value of the aircraft have to be to make the investment;in the aircraft financially attractive?;A. $2,007,075;B.;$240,849;C. $28,902;D.;$596,161;14-38;(Ignore income taxes in this problem.) Eckels Corporation is;considering the following three investment projects;100. The profitability index of investment project N is closest to: A.;0.18;B. 0.82 C.;1.18 D. 0.15;101. Rank the projects according to the profitability index, from most;profitable to least profitable.;A. N,O,M B.;O,N,M C. M,N,O D. N,M,O;14-39;102. The profitability index of investment project J is closest to: A.;0.08;B. 0.91 C.;0.09 D. 1.09;103. Rank the projects according to the profitability index, from most;profitable to least profitable.;A. J,K,I B.;K,J,I C. K,I,J D. I,K,J;14-40;104. The payback period on the new machine is closest to: A. 5 years;B. 2.7;years C. 3.6 years D. 1.4 years;105. The simple rate of return for the new machine is closest to: A.;20%;B. 37.5% C.;27.5% D. 80.0%;14-41;The company uses straight-line depreciation and a $5,000 salvage;value. (The company considers salvage value in making depreciation deductions.);Assume cash flows occur uniformly throughout a year.;106. The payback period would be closest to: A. 3.33 years;B. 3.0;years C. 8.0 years D. 2.9 years;107. The simple rate of return would be closest to: A. 30.0%;B. 17.5% C.;18.75% D. 12.5%;14-42;ten years, the project would;terminate and the equipment would have no salvage value. The project would;provide net operating income each year as follows;All of these items, except;for depreciation of $100,000 a year, represent cash flows. The depreciation is;included in the fixed expenses. The company's required rate of return is 12%.;Required;a.;Compute the project's net;present value.;b.;Compute the project's;internal rate of return to the nearest whole percent.;c.;Compute the project's;payback period.;d.;Compute the project's simple;rate of return.;14-43;a. Machine A will cost $25,000 and have a life of 15 years. Its;salvage value will be $1,000, and cost savings are projected at $3,500 per;year. Compute the machine's net present value.;b. How much will Prince Company be willing to pay for Machine B if;the machine promises annual cash inflows of $5,000 per year for 8 years?;c. Machine C has a projected life of 10 years. What is the machine's;internal rate of return, to the nearest whole percent, if it costs $30,000 and;will save $6,000 annually in cash operating costs? Would you recommend;purchase? Explain.;14-44;The;working capital will be released for use elsewhere at the conclusion of the;project.;Required;Compute the project's net present value.;111. (Ignore income taxes in;this problem.) Bradley Company's required rate of return is 14%. The company;has an opportunity to be the exclusive distributor of a very popular consumer;item. No new equipment would be needed, but the company would have to use;one-fourth of the space in a warehouse it owns. The warehouse cost $200,000;new. The warehouse is currently half-empty and there are no other plans to use;the empty space. In addition, the company would have to invest $100,000 in;working capital to carry inventories and accounts receivable for the new;product line. The company would have the distributorship for only 5 years. The;distributorship would generate a $17,000 annual net cash inflow.;Required;What is the net present value of the project at a discount rate of;14 per cent? Should be project be accepted?;14-45;Required;Compute the net present;value of each project assuming Monson Company uses a 12% discount rate.;14-46;The;company uses a discount rate of 10%.;Required;Compute the net present value of the project.;114. (Ignore income taxes in;this problem.) Furner Inc. is considering investing in a project that would;require an initial investment of $480,000. The life of the project would be 8;years. The annual net cash inflows from the project would be $120,000. The;salvage value of the assets at the end of the project would be $72,000. The;company uses a discount rate of 17%.;Required;Compute the net present value of the project.;14-47;The company uses a discount rate of 11%. The working capital would;be released at the end of the project.;Required;Compute the net present value of the project.;116. (Ignore income taxes in;this problem.) Korber Corporation is considering investing $820,000 in a;project. The life of the project would be 8 years. The project would require;additional working capital of $18,000, which would be released for use;elsewhere at the end of the project. The annual net cash inflows would be;$246,000. The salvage value of the assets used in the project would be $41,000.;The company uses a discount rate of 19%.;Required;Compute the net present value of the project.;14-48;Required;Determine the net present value of the project. Show your work!;118. (Ignore income taxes in;this problem.) The management of Matza Corporation is considering the purchase;of a machine that would cost $370,000, would last for 9 years, and would have;no salvage value. The machine would reduce labor and other costs by $63,000 per;year. The company requires a minimum pretax return of 10% on all investment;projects.;Required;Determine the net present value of the project. Show your work!;14-49;Required;Determine the net present value of the project. Show your work!;120. (Ignore income taxes in;this problem.) AB Company is considering the purchase of a machine that;promises to reduce operating costs by the same amount for every year of its;6-year useful life. The machine will cost $83,150 and has no salvage value. The;machine has a 20% internal rate of return.;Required;What are the annual cost savings promised by the machine?;14-50;Determine the internal rate of return on the investment in the new;machine. Show your work!

 

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