Whatistheinternalrateof on return a 12 b 16 c 20 d 24

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Unformatted text preview: ompany Discount rate 20% is in the process of What is the net present value of the investment? Assume there is no recovery of working capital. A) $(62,140) B) $10,336 C) $42,362 D) $186,336 Answer: B Explanation: B) $ Diff: 3 T 3 AACSB: Analytical skills 71) The capital budgeting method that calculates the discount rate at which the present value of expected cash inflows from a project equals the present value of expected cash outflows is the: A) net present B) value method accrual C) accounting rate-of-return method payback method D) internal rate of return Answer: D Diff: 2 Terms: internal rate-ofreturn (IRR) method Objective: 3 AACSB: Reflective thinking 72) In capital budgeting, a project is accepted only if the internal rate of return equals or: A) exceeds the B) required rate of return is less than the required rate of return C) exceeds the net present value D) exceeds the accrual accounting rate of return Answer: A Diff: 2 Terms: internal rate-ofreturn (IRR) method, required rate of return (RRR) Objective: 3 AACSB: Reflective thinking 73) The Zeron Corporati on recently purchased a new machine for its factory operations at a cost of $921,250. The investment is expected to generate $250,000 in annual cash flows for a period of six years. The required rate of return is 14%. The old machine has a remaining life of six years. The new machine is expected to have zero value at the end of the six-year period. The disposal value of the old machine at the time of replacement is zero. What is the internal rate of return? A) 15% B) 16% C) 17% D) 18% Answer: B Explanation: B) $ Diff: 3 T C 3 AACSB: Analytical skills 74) Brown recently purchased a new machine for $339,013.20 with a ten-year life. The old equipment has a remaining life of ten years Corporati and no disposal value at the time of replacement. Net cash flows will be $60,000 per year. What is the internal rate of on return? A) 12% B) 16% C) 20% D) 24% Answer: A Explanation: A) $ Diff: 2 T C 3 AACSB: Analytical skills 75) Soda Manufact uring Company provides vending machines for soft-drink manufacturers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of three years and the new equipment has a value of $52,650 with a three-year life. The expected additional cash inflows are $25,000 per year. What is the internal rate of return? A) 20% B) 16% C) 10% D) 8% Answer: A Explanation: A) $ Diff: 2 T C 3 AACSB: Analytic...
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