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Unformatted text preview: GNB 12e Practice Exam – Chapter 14 Print these pages. Answer each of the following questions, explaining your answers or showing your work, as appropriate, and then compare your solutions to those provided at the end of the practice exam. 1 . The following data pertain to an investment that is being considered by the management of Newton Company: Cost of the investment $56,865 Estimated salvage value $ 3,000 Annual cost savings $ 15,000 Life of the project 5 years Discount rate 10% Part (a) What is the net present value of the proposed investment? Part (b) Should the project be accepted? 2. Touro Company has gathered the following data on a proposed investment project: Cost of the investment $1,200,000 Estimated salvage value $0 Annual cost inflows $240,000 Life of the project 10 years Discount rate 10% Part (a) What is the payback period for the investment? Part (b) What is the simple rate of return on the investment? 3. Touro Company has gathered the following data on a proposed investment project:...
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- Spring '09
- Net Present Value, project discount rate, Touro Company, investment Estimated salvage, salvage value Annual, value Annual cost