111. Below is a table for the present value of $1 at compound interest.
Year6%10%12%
1.943.909.893
2.890.826.797
3.840.751.712
4.792.683.636
5.747.621.567
Below is a table for the present value of an annuity of $1 at compound interest.
Year6%10%12%
1.943.909.893
21.8331.7361.690
32.6732.4872.402
43.4653.1703.037
54.2123.7913.605
Using the tables above, what is the present value of $6,000 (rounded to the nearest dollar) to be received at the end of each of the next 4 years, assuming an earnings rate of 10%?
A. $20,790
B. $19,020
C. $14,412
D. $25,272
112. Below is a table for the present value of $1 at compound interest.
Year6%10%12%
1.943.909.893
2.890.826.797
3.840.751.712
4.792.683.636
5.747.621.567
Below is a table for the present value of an annuity of $1 at compound interest.
Year6%10%12%
1.943.909.893
21.8331.7361.690
32.6732.4872.402
43.4653.1703.037
54.2123.7913.605
Using the tables above, if an investment is made now for $20,000 that will generate a cash inflow of $7,000 a year for the next 4 years, what would be the net present value (rounded to the nearest dollar) of the investment cash inflows, (assuming an earnings rate of 12%)?
A. $20,352
B. $3,969
C. $22,190
D. $21,259
113. The production department is proposing the purchase of an automatic insertion machine. They have identified 3 machines and have asked the accountant to analyze them to determine the best average rate of return.
Machine AMachine BMachine C
Estimated Average Income$40,000$50,000$75,000
Average Investment$300,000$250,000$500,000
A. Machine B
B. Machine C
C. Machine B or C
D. Machine A
114. The production department is proposing the purchase of an automatic insertion machine. They have identified 3 machines and have asked the accountant to analyze them to determine the best cash payback.
Machine AMachine BMachine C
Estimated Average Income$40,000$50,000$75,000
Average Investment$300,000$250,000$500,000
A. Machine A
B. Machine C
C. Machine B
D. All are equal.
115. The cash payback method is widely used in evaluating investments. The following are reasons why this method is used except:
A. The longer the payback, the longer the estimated life of the asset.
B. The shorter the payback, the sooner the cash spend on the investment is recovered.
C. The shorter the payback, the least likely the possibility of obsolescence
D. All of the above are correct.
116. The production department is proposing the purchase of an automatic insertion machine. They have identified 3 machines and have asked the accountant to analyze them to determine which of the proposals (if any) meet or exceed the company’s policy of a minimum desired rate of return of 10% using the net present value method. Each of the assets has a estimated useful life of 10 years.
Machine AMachine BMachine C
Present value of future cash flows
computed using 10% rate of return
$305,000
$295,000
$300,000
Amount of initial investment$300,000$300,000$300,000
A. A & C
B. B & C
C. B
D. A
117. The production department is proposing the purchase of an automatic insertion machine. They have identified 3 machines, each with an estimated life of 10 years. Which machine offers the best internal rate of return?
Machine AMachine BMachine C
Annual net cash flows$50,000$40,000$75,000
Average investment$250,000$300,000$500,000
A. Machine B
B. Machine C
C. Machine A and B
D. Machine A
118. All of the following qualitative considerations may impact upon capital investments analysis except:
A. manufacturing productivity
B. manufacturing sunk cost
C. manufacturing flexibility
D. manufacturing control
119. All of the following qualitative considerations may impact upon capital investments analysis except:
A. time value of money
B. employee morale
C. the impact on product quality
D. manufacturing flexibility
120. Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from capital investment projects?
A. Interest deduction
B. Depreciation deduction
C. Minimum tax provision
D. Charitable contributions