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 rateofreturn method payback method D) internal rate of return Answer: D Diff: 2 Terms: internal rateofreturn (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 rateofreturn (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 sixyear 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 tenyear 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 softdrink 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 threeyear 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...
View
Full
Document
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.
 Spring '10
 ALL
 Accounting, Cost Accounting, The Bible

Click to edit the document details