q14 - 1 The net present value and internal rate of return...

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The net present value and internal rate of return methods of capital budgeting are superior to the payback method in that they: A) are easier to implement. B) consider the time value of money. C) require less input. D) reflect the effects of depreciation and income taxes. 2. (Ignore income taxes in this problem.) The following data pertain to an investment in equipment: Investment in the project $10,000 Net annual cash inflows 2,400 Working capital required 5,000 Salvage value of the equipment 1,000 Life of the project 8 years At the completion of the project, the working capital will be released for use elsewhere. Compute the net present value of the project, using a discount rate of 10%: A) $606. B) $8,271. C) ($1,729). D) $1,729. 3. (Ignore income taxes in this problem.) The following data pertain to an investment proposal: Present investment required $26,500 Annual cost savings $ 5,000 Projected life of the investment 10 years Projected salvage value $ -0- The internal rate of return, interpolated to the nearest tenth of a percent, would be: A) 11.6%. B) 12.8%. C) 13.6%. D) 12.4%. 4. (Ignore income taxes in this problem.) The following data pertain to an investment proposal: Investment in the project (equipment) $14,000 Net annual cash inflows promised 2,800 Working capital required 5,000 Page 1
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This note was uploaded on 05/17/2011 for the course ACCT 203 taught by Professor Mac during the Spring '11 term at Chicago State.

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q14 - 1 The net present value and internal rate of return...

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