test chapter 14

# test chapter 14 - 1(Ignore income taxes in this problem Noe...

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1. (Ignore income taxes in this problem.) Noe Corporation has entered into a 8 year lease for a building it will use as a warehouse. The annual payment under the lease will be \$2,520. The first payment will be at the end of the current year and all subsequent payments will be made at year- ends. What is the present value of the lease payments if the discount rate is 12%? \$18,000 \$8,142 \$12,519 \$20,160 (Ignore income taxes in this problem.) Jones and Company has just purchased a new piece of equipment, the cost characteristics of which are given below: The company uses a required rate of return of 10% and depreciates equipment using the straight- line method. 2. The payback period for the investment is: 5 years 2 years 15 years 7.143 years 3. The payback period for the investment is: 15 years 7.143 years 5 years 2 years

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4. The simple rate of return for the investment (rounded to the nearest tenth of a percent) is: 13.3% 10.0% 20.0% 18.0% 5. The net present value of the investment is: \$24,000 \$60,000 \$45,636 \$15,636 6. The internal rate of return of the investment is closest to: 18% 16% 20% 22% The net present value method assumes that the project's cash flows are reinvested at the: the payback rate of return. internal rate of return. the simple rate of return. the discount rate used in the net present value calculation. (Ignore income taxes in this problem.) Tighe Corporation is contemplating purchasing equipment that would increase sales revenues by \$420,000 per year and cash operating expenses by \$231,000 per year. The equipment would cost \$747,000 and have a 9 year life with no salvage
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