SwiftyCompany is considering two capital investment proposals.
Estimates regarding each project are provided below:
| Project Soup | Project Nuts | |
| Initial investment | $400000 | $600000 |
| Annual net income | 12000 | 28000 |
| Net annual cash inflow | 90000 | 113000 |
| Estimated useful life | 5 years | 6 years |
| Salvage value | 0 | 0 |
The company requires a 10% rate of return on all new
investments.
| Present Value of an Annuity of 1 | ||||
| Periods | 9% | 10% | 11% | 12% |
| 5 | 3.89 | 3.791 | 3.696 | 3.605 |
| 6 | 4.486 | 4.355 | 4.231 | 4.111 |
The annual rate of return for Project Soup is
3.0%.
22.5%.
45%.
6%.
12. Use the following table,
Use the following table,
A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $349278 and is expected to generate cash inflows of $138000 each year for three years. The approximate internal rate of return on this project is 9%. 10%. 8%. the IRR on this project cannot be approximated. |
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A company has a minimum required rate of return of 8%. It is
considering investing in a project that costs $349278 and is
expected to generate cash inflows of $138000 each year for three
years. The approximate internal rate of return on this project
is
9%.
10%.
8%.
the IRR on this project cannot be approximated.
13. A company is considering purchasing a machine that costs
$344000 and is estimated to have no salvage value at the end of its
8-year useful life. If the machine is purchased, annual revenues
are expected to be $100000 and annual operating expenses exclusive
of depreciation expense are expected to be $38000. The
straight-line method of depreciation would be used.
If the machine is purchased, the annual rate of return expected on
this machine is
36.04%.
11.05%.
5.52%.
18.02%.
14. A company projects an increase in net income of $184500 each year for the next five years if it invests $900000 in new equipment. The equipment has a 5-year life and an estimated salvage value of $300000. What is the annual rate of return on this investment?
20.5%
31.0%
30.0%
30.8%
15.
A company is considering purchasing factory equipment that costs
$480000 and is estimated to have no salvage value at the end of its
8-year useful life. If the equipment is purchased, annual revenues
are expected to be $106200 and annual operating expenses exclusive
of depreciation expense are expected to be $39000. The
straight-line method of depreciation would be used.
If the equipment is purchased, the annual rate of return expected
on this equipment is
3.0%.
14.0%.
28.0%.
1.5%.
Note : As per HomeworkLib honor code only one question can be asked at a time as it is not mentioned which question is to be answered so only 12th question is answered hope you understand
Answer 12: 9%
Calculated as
Initial investment = $349278
Annual cash inflow = $138000
Present value factor = 349278/138000 = 2.531
From the table given we can trace that for three years life present value factor of 2.531 lies under 9%
| Period | 8% | 9% | 10% |
| 1 | 0.926 | 0.917 | 0.909 |
| 2 | 1.783 | 1.759 | 1.736 |
| 3 | 2.577 | 2.531 | 2.487 |
hence answer is 9%
SwiftyCompany is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup...