90%(21)19 out of 21 people found this document helpful
This preview shows page 64 - 66 out of 66 pages.
Click here to view Exhibit 8B-1to determine the appropriate discount factor(s) using tables.Management is having diﬃculty estimating the salvage value of the aircraft. How large would the salvagevalue of the aircraft have to be to make the investment in the aircraft financially attractive? (Round yourfinal answer to the nearest dollar amount.)final answer to the nearest dollar amount.)$86,958$579,721$1,541,811$3,864,807Minimum salvage value = Negative net present value to the offset ÷ Present value factor= $579,721 ÷ 0.376 = $1,541,811ReferencesMultiple ChoiceLearning Objective: 08-03Evaluate an investment projectthat has uncertain cash ﬂows.(Ignore income taxes in this problem.) Deibel Corporation is considering a project that would require aninvestment of $62,000. No other cash outﬂows would be involved. The present value of the cash inﬂowswould be $77,500. The profitability index of the project is closest to: (Round your answer to 2 decimal(Round your answer to 2 decimalplaces.)places.)0.250.200.751.25Project AInvestment required (a)$(62,000) Present value of cash inﬂows77,500 Net present value (b)$15,500 Project profitability index (b) ÷ (a)0.25 ReferencesMultiple ChoiceLearning Objective: 08-04 Rankinvestment projects in order ofpreference.TTUITTUITTTT
99.Award: 0 out of 1.00 point0 out of 1.00 point100.Award: 0 out of 1.00 point0 out of 1.00 point(Ignore income taxes in this problem.) The Jackson Company has invested in a machine that cost $92,000,that has a useful life of sixteen years, and that has no salvage value at the end of its useful life. The machineis being depreciated by the straight-line method, based on its useful life. It will have a payback period ofeight years. Given these data, the simple rate of return on the machine is closest to: (Round your answerto 1 decimal place.)to 1 decimal place.)2.7%3.8%6.3%18.8%Annual incremental cost savings*$11,500 Annual incremental expenses:Annual depreciation ($92,000 −$0)/16$5,750 5,750 Annual incremental net operating income$5,750 *Payback period = Investment required ÷ Annual net cash inﬂow8 years = $92,000 ÷ Annual net cash inﬂowAnnual net cash inﬂow = $92,000 ÷ 8 years = $11,500 yearly cash ﬂowSimple rate of return = Annual incremental net operating income ÷ Initial investment= $5,750 ÷ $92,000 = 6.3%ReferencesMultiple ChoiceLearning Objective: 08-05Determine the payback period foran investment.Learning Objective: 08-06 Compute the simple rate of return for aninvestment.(Ignore income taxes in this problem.) The Higgins Company has just purchased a piece of equipment at acost of $100,000. This equipment will reduce operating costs by $60,000 each year for the next six years.This equipment replaces old equipment which was sold for $10,000 cash. The new equipment has a paybackperiod of: (Round your answer to 1 decimal place.)(Round your answer to 1 decimal place.)1.7 years1.5 years6.0 years7.5 yearsPayback period = Investment required ÷ Annual net cash inﬂow= ($100,000 −$10,000) ÷ $60,000 per year = 1.5 yearsReferencesMultiple ChoiceLearning Objective: 08-05Determine the payback period foran investment.