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The following relates to a proposed equipment purchase:
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The following relates to a proposed equipment purchase:<br/> <br/>   Cost$153,000  Salvage

value$3,000  Estimated useful life 4years Annual net cash flows$50,600  Depreciation methodStraight-line 
Ignoring income taxes, the annual net income amount used to calculate the accounting rate of return is:
Multiple Choice

-$50,600
-$13,100
-$13,850
-$88,100
-$49,850



A company is considering the purchase of new equipment for $99,000. The projected annual net cash flows are $38,800. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 8% return on investment. The present value of an annuity of $1 for various periods follows:
    
PeriodPresent value of an annuity of $1 at 8%10.925921.783332.5771
   
What is the net present value of this machine assuming all cash flows occur at year-end?
Multiple Choice

-$33,000
-$4,800
-$991
-$37,800
-$97,414

the following present value factors are provided for use in this problem.
 
PeriodsPresent Value
of $1 at 8%Present Value of an
Annuity of $1 at 8%1 0.9259  0.9259 2 0.8573  1.7833 3 0.7938  2.5771 4 0.7350  3.3121 
 
Cliff Co. wants to purchase a machine for $40,000, but needs to earn a return of 8%. The expected year-end net cash flows are $12,000 in each of the first three years, and $16,000 in the fourth year. What is the machine's net present value?
Multiple Choice

-$(9,075).
-$2,685.
-$42,685.
-$(28,240).
-$52,000.





 company is planning to purchase a machine that will cost $24,600 with a six-year life and no salvage value. The company uses straight-line depreciation. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine?
 
        Sales   $91,000  Costs:       Manufacturing$52,100     Depreciation on machine 4,100     Selling and administrative expenses 31,000  (87,200) Income before taxes   $3,800  Income tax (35%)    (1,330) Net income   $2,470  
Multiple Choice

-50.00%.
-10.04%.
-4.10%.
-33.33%.
-20.08%.

Step-by-step answer

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Subject: Accounting, Business

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