NOREEN MANAGERIAL ACCOUNTING FOR MANAGERS 2E
Practice– Chapter 13
1
.
The following data pertain to an investment that is being considered by the management of
Newman Company:
Cost of the investment
$55,000
Estimated salvage value
$ 3,000
Annual cost savings
$ 15,000
Life of the project
5 years
Discount rate
10%
(a) What is the net present value of the proposed investment?
(b) Should the project be accepted? Why or why not?
2.
Trent Company has gathered the following data on a proposed investment project:
Cost of the investment
$1,600,000
Estimated salvage value
$0
Annual cost inflows
$200,000
Life of the project
10 years
Discount rate
10%
Part (a) What is the payback period for the investment?
Part (b) What is the simple rate of return on the investment?
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Marren Company has gathered the following data on a proposed investment project:
Cost of the investment
$1,130,000
Estimated salvage value
$0
Annual cost inflows
$
200,000
Life of the project
10 years
Discount rate
10%
(a) What is the approximate internal rate of return for this investment?
(b) What is the net present value
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 Spring '08
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 Net Present Value, Noreen

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