2024 – Question 01 The following data pertain to an investment that is being considered by the

Question 01

 

The following data pertain to an investment that is being considered by the management of Hanson Company:
  Discount rate8%    Life of the project4 years    Cost of the investment$46,368    Annual cost savings14,000    Salvage value2,800  
The net present value of the proposed investment is (Round your intermediate calculations to 3-decimals and your present value calculations to the nearest dollar amount.):

−$2,058.
$0.
$2,058.
$46,368

Question 02

Hamell Company has gathered the following data on a proposed investment project:
  Discount rate8%    Life of the project8 years    Initial investment$450,000    Annual cash inflows85,000    Salvage value0  
The net present value on the proposed investment is closest to (Round your intermediate calculations to 3-decimals and your present value calculations to the nearest dollar amount.): 

Question 03

 

In comparing two investment alternatives, the difference between the net present values of the two alternatives obtained using the total-cost approach will be:

greater than the net present value obtained using the incremental cost approach.
less than the net present value obtained using the incremental cost approach.
the same as the net present value obtained using the incremental cost approach.
indeterminable.

Question 04

 

Acme Company is considering investing in a new machine that costs $84,103 and that has a useful life of 10 years with no salvage value. The machine will generate $15,500 annually in net cash inflows. The internal rate of return on the investment is: (Round your intermediate calculations to 3-decimals and your internal rate of return calculations to the nearest whole percent.)

9%.

13%.

7%.

11%. 

Question 05

 

A project with a 9-year life has tangible costs and benefits with a $110,000 negative net present value. The company’s discount rate is 11%. The amount of annual cash inflow would have to be provided by the project’s intangible benefits in order for the project to be acceptable is (Round your intermediate calculation to 3-decimals and final answer to the nearest dollar amount.):

  

$110,000.

$21,434.

$129,866.

$19,866.

Question 06

 

A project with a 8-year life has tangible costs and benefits with a $123,000 negative net present value. The company’s discount rate is 10%. The amount of annual cash inflow would have to be provided by the project’s intangible benefits in order for the project to be acceptable is (Round your intermediate calculation to 3-decimals and final answer to the nearest dollar amount.):

$15,375.

$12,300.

$21,055.

$23,055. 

Question 07

 

Hartley Company is considering the following investment proposals:
ABCD  Investment required$160,000  $200,000  $120,000  $150,000    Present value of future net cash flows192,000  300,000  168,000  240,000  
Management should rank the proposals in terms of preference using the profitability index as:

B, D, A, C.
D, B, C, A.
B, D, C, A.
A, C, B, D

Question 08

 

The preference rule for ranking projects by the profitability index is:

the higher the sunk cost, the more desirable the project.
the lower the profitability index, the more desirable the project.
the lower the sunk cost, the more desirable the project.
the higher the profitability index, the more desirable the project.

Question 09

 

All of the following statements are incorrect except:

the payback period is the length of time it takes for an investment to recoup its own initial cost out of the cash receipts it generates.
projects with shorter payback periods are always more profitable than projects with longer payback periods.
the payback method of making capital budgeting decisions gives full consideration to the time value of money.
if new equipment is replacing old equipment, any salvage received from sale of the old equipment should not be considered in computing the payback period of the new equipment.

Question 10

 

Hamell Company has gathered the following data on a proposed investment project:
  Discount rate9%    Life of the project9 years    Initial investment$291,100    Annual cash inflows71,000    Salvage value0  
The payback period for the proposed investment is closest to (Round your answer to 2 decimal places.):

0.24 years.
4.10 years.
3.04 years.
1.04 years.

Question 11

 Hamell Company has gathered the following data on a proposed investment project:
  Discount rate10%    Life of the project10 years    Initial investment$460,000    Annual cash inflows105,800    Salvage value0  
Assume that excess of incremental revenues over the incremental expenses (including depreciation) equal the annual cash inflows. The simple rate of return on the proposed investment is closest to: (Round your answer to 1 decimal place.) 

 

13.0%.

33.0%.

23.0%.

43.0%.

Question 12

 

A machine is under consideration that would cost $18,000, save $4,400 per year in cash operating costs, and have an expected life of 15 years with zero salvage value. The simple rate of return is approximately: (Round your answer to 2 decimal places.)

24.44%.
6.67%.
17.78%.
22.44%.

Question 13

 

White Company’s required rate of return and discount rate is 12%. The company is considering an investment that would yield a cash inflow of $10,300 in five years. The maximum amount that the company should be willing to invest in this project is (Round your intermediate calculation to 3-decimals and final answer to the nearest dollar amount.):

$2,857.

$5,840.

$18,166.

$37,132. 

Question 14

 Farris is considering making an investment now that is expected to return $63,000 in four years from now. Farris demands a 8% return. The maximum amount that Farris should be willing to invest in this project is (Round your intermediate calculation to 3-decimals and final answer to the nearest dollar amount.): 

 

$63,000.

$19,022.

$46,305.

$85,714.

Question 15

 

(Ignore income taxes in this problem.) The Jackson Company has invested in a machine that cost $190,000, that has a useful life of thirteen years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of four years. Given these data, the simple rate of return on the machine is closest to (Round your intermediate calculations to the nearest dollar amount): 

15.38%

18.75%

17.31%

32.69%