Question

Siesta Manufacturing has asked you to evaluate a capital investment project. The project will require an initial investment of $88,000. The life of the investment is 7 years with a residual value of $4,000. If the project produces net annual cash inflows of $16,000, what is the accounting rate of return?

In what ways are the Payback Period and Accounting Rate of Return methods of capital budgeting alike?

ABC Company is adding a new product line that will require an investment of $1,500,000. The product line is estimated to generate cash inflows of $300,000 the first year, $250,000 the second year, and $200,000 each year thereafter for ten more years. What is the payback period?

Bonneville Manufacturing is considering an investment that would require an initial net investment of $650,000. The following annual revenues/expenses relate exclusively to the investment: Sales $350,000 -Variable expenses -$40,000 -Salaries expense -$28,000 -Rent expense -$20,000 -Depreciation expense -$40,000 Operating income $222,000 The investment will have a residual value of $50,000 at the end of its 15 year useful life. What is the payback period for this investment?

An annuity is best described as which of the following statements? A stream of interest payments on a principal amount invested, Another term used for future value, A stream of equal cash installments made at equal time intervals

Another term used for present value Concose Park Department is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $330,000. The annual cost savings if the new machine is acquired will be $85,000. The machine will have a 5-year life, at which time the terminal disposal value is expected to be $32,000. Concose Park Department is assuming no tax consequences. If Concose Park Department has a required rate of return of 10%, what is the NPV of the project?

Norwood, Inc. is considering three different independent investment opportunities. The present value of future cash flows for each are as follows: Project A =$600,000, Project B = $550,000 & Project C = $500,000. The initial investment of each project is as follows: Project A =$320,000, Project B = $300,000 & Project C = $230,000. Use the Profitability index to determine what order should Norwood prioritize investment in the projects?

The discount rate that sets the present value of a project’s cash inflows equal to the present value of the project’s investment is called: NPV, ARR, IRR, payback period

Chris Tellson invested in a project with a payback period of 4 years. The project earns $30,000 cash each year for 8 years. Chris’s required minimum rate of return is 8%. How much did Chris initially invest?

The time value of money is considered in the following capital budgeting method(s)? Profitability Index. NPV, All answers given use the time value of $, IRR

Answer 1