Incometaxesarenotconsideredinthisproblemtheworkingcapi

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Unformatted text preview: no Answer: A Explanation: A) Y Y Y Y net present value (NPV) method Objective: 3 AACSB: Analytical skills 58) What is the net present value of the investment, assuming the required rate of return is 24%? Would the company want to purchase the new machine? A) $(32,800); yes B) $(16,400); no C) $16,400; yes D) $32,800; no Answer: C Explanation: C) Y Y Y Y net present value (NPV) method, required rate of return (RRR) Objective: 3 AACSB: Analytical skills Answer the following questions using the information below: Jonesville Hospital has been considering the purchase of a new x-ray machine. The existing machine is operable for five more years and will have a zero disposal price. If the machine is disposed now, it may be sold for $45,000. The new machine will cost $325,000 and an additional cash investment in working capital of $10,000 will be required. The new machine will reduce the average amount of time required to take the x-rays and will allow an additional amount of business to be done at the hospital. The investment is expected to net $30,000 in additional cash inflows during the year of acquisition and $115,000 each additional year of use. The new machine has a five-year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life. 59) What is the net present value of the investment, assuming the required rate of return is 12%? Would the hospital want to purchase the new machine? A) $(48,670); no B) $25,715; no C) $ 48,670; yes D) $83,415; yes Answer: C Explanation: C) Y Y Y Y Y Y net present value (NPV) method Objective: 3 AACSB: Analytical skills 60) What is the net present value of the investment, assuming the required rate of return is 20%? Would the hospital want to purchase the new machine? A) $16,955; yes B) $(16,955); no C) $(16,955); yes D) $25,350; yes Answer: B Explanation: B) Y Y Y Y Y Y net present value (NPV) method Objective: 3 AACSB: Analytical skills 61) In using the net present value method, only projects with a zero...
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This note was uploaded on 09/18/2010 for the course ACCT 424 taught by Professor All during the Spring '10 term at DeVry Long Beach.

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