Thereforeletstry 12 initialinvestment

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Unformatted text preview: rect. Answer: C Diff: 3 Terms: capital budgeting Objective: 7 AACSB: Analytical skills 108) Match 1. Identify Projects each one 2. Obtain Information of the 3. Make Predictions examples 4. Make Decisions by Choosing Among Alternatives below 5. Implement the Decision, Evaluate Performance, and Learn with one of the ________ a. Issuing corporate stock for the funds to purchase new equipment stages of ________ b. Learning how to effectively operate Machine #8 only takes 15 minutes the capital ________ c. The need to reduce the costs to process the vegetables used in producing goulash budgeting ________ d. Monitoring the costs to operate a new machine decision ________ e. Percentage of defective merchandise considered too high model. ________ f. Will introducing the new product substantially upgrade our image as a producer of quality products? ________ g. Research indicates there are five machines on the market capable of producing our product at a competitive cost. Stages: ________ h. Use of the internal rate of return for each alternative Answer: a. Implement the Decision, Evaluate Performance, and Learn b. Obtain Information c. Identify Projects d. Implement the Decision, Evaluate Performance, and Learn e. Identify Projects f. Obtain Information g. Obtain Information h. Make Decisions by Choosing Among Alternatives Diff: 2 Terms: capital budgeting Objective: 2 AACSB: Reflective thinking 109) The Zero proposal that requires an initial investment of $20,960 and has predicted cash inflows of $5,000 per year for 10 years. It Machine will have no salvage value. Company is Required: evaluating a capital a. Using a required rate of return of 16%, determine the net present value of the investment proposal. expenditu re b. Determine the proposal's internal rate of return. Answer: a. Predicted Cash Flows Year(s) PV Factor $(20,960) 0 1.000 5,000 10 4.833 PV of Cash Flows Initial investment Annual operations Net present value b. Present value factor of an annuity of $1.00 = $20,960/$5,000 = 4....
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