Question 1

Simms Manufacturing is considering two alternative investment proposals with the following data:
 What is the accounting rate of return for Proposal Y?

Accepted Answer

A

Question 2

Logan, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available:
 The present value factors of $1 due 3 years from now
 
-How long is the payback period for Investment A?

Accepted Answer

The payback period is the time it takes for an investment to generate an amount of income or cash equal to the cost of the investment. The correct answer can be determined by dividing the initial investment cost by the annual cash inflow. Without specific numbers provided for Investment A, the correct answer cannot be precisely calculated, but based on the options given, B) 2.4 years is selected as the placeholder correct answer.

Question 3

Logan, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available:
 The present value factors of $1 due 3 years from now:
 
-How long is the payback period for Investment B?

Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash inflow. Without specific numbers for Investment B, the correct answer cannot be determined from the information provided. However, based on the choices given, B (2.25 years) is marked as the correct answer, implying it was chosen based on information or calculations not provided in the question.

Question 4

Simms Manufacturing is considering two alternative investment proposals with the following data:
 Note: Present value tables are needed.
What is the net present value of Proposal X?

Accepted Answer

The answer of Simms Manufacturing is considering two alternative investment...

Question 5

Simms Manufacturing is considering two alternative investment proposals with the following data:
 Note: Present value and future value tables are needed.
Using the net present value model, which alternative should Simms select, and why?

Accepted Answer

The answer of Simms Manufacturing is considering two alternative investment...

Question 6

Atlantic Company is considering investing in specialized equipment costing $360,000. The equipment has a useful life of 5 years and a residual value of $45,000. Depreciation is calculated using the straight- line method. The expected net cash inflows from the investment are:
 Note: Present value tables are needed.
Is the internal rate of return of the investment equal to, higher than, or lower than 14%?

Accepted Answer

The answer of Atlantic Company is considering investing in specialized...

Question 7

Logan, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available:
 The present value factors of $1 due 3 years from now are:
 The annuity present value factors of $1 per year due at the end of each of 3 years are:
 
-The internal rate of return for Investment A is approximately what percentage?

Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. Without specific cash flow details, the IRR is typically estimated based on the context or given data, which in this case suggests 12% as the approximate IRR for Investment A.

Question 8

Logan, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available:
 The present value factors of $1 due 3 years from now are:
 The annuity present value factors of $1 per year due at the end of each of 3 years are:
 
-How much is the net present value of Investment B?

Accepted Answer

The net present value (NPV) of an investment is calculated by discounting the future cash flows back to their present value and subtracting the initial investment. Without specific cash flow details, discount rates, or investment amounts for Investment B, it's impossible to accurately calculate the NPV. However, based on the provided options and assuming this is the correct answer to a given scenario, option B ($6,072) would be the correct choice. This answer assumes familiarity with the scenario or question details not provided here.

Question 9

Head, Inc. is deciding whether to automate one phase of its production process. The equipment has a six- year life and will cost $450,000. Projected net cash inflows from the equipment are as follows:
(Note: Present value tables are needed.)
 Head, Inc.'s hurdle rate is 12%. Assume the residual value is zero. If Head, Inc. decides to refurbish the equipment at a cost of $50,000 at the end of year 6, it could be used for one more year and would have a $30,000 residual value. Assume the cash inflow in year 7 is $40,000. What is the NPV of the refurbishment?

Accepted Answer

The answer of Head, Inc. is deciding whether to automate...

Question 10

The Petty Company has analyzed an investment opportunity costing $270,000 and determined That the net present value is $1,420. Petty's management estimated that the investment would Generate cash inflows of $50,000 a year for eight years and used a discount rate of 10%. What was the Salvage value associated with the investment opportunity? Note: Present value tables are needed.

Accepted Answer

The net present value (NPV) formula is NPV = (Cash inflows * PVIFA) + (Salvage value * PVIF) - Initial investment. Given that the NPV is $1,420, the initial investment is $270,000, the cash inflows are $50,000 per year for 8 years, and the discount rate is 10%, we can calculate the salvage value. The Present Value Interest Factor for Annuity (PVIFA) for 8 years at 10% is approximately 5.335, and the Present Value Interest Factor (PVIF) for 8 years at 10% is approximately 0.467. Plugging the values into the formula: $1,420 = ($50,000 * 5.335) + (Salvage value * 0.467) - $270,000. Solving for the salvage value gives approximately $10,000.

Question 11

Jackson Corporation is considering the following three investment opportunities:
Investment 1: Has an initial cost of $300,000 and the present value of its net cash inflows is $345,000.
Investment 2: Has an initial cost of $500,000 and the present value of its net cash inflows is $550,000.
Investment 3: Has an initial cost of $700,000 and the present value of its net cash inflows is $756,000.
Which of the following statements is correct?

Accepted Answer

The answer of Jackson Corporation is considering the following three...

Quiz 11: Capital Investment Decisions and the Time Value of Money

Simms Manufacturing is considering two alternative investment proposals with the following data: What is the accounting rate of return for Proposal Y?

Logan, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: The present value factors of $1 due 3 years from now -How long is the payback period for Investment A?

Logan, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: The present value factors of $1 due 3 years from now: -How long is the payback period for Investment B?

Simms Manufacturing is considering two alternative investment proposals with the following data: Note: Present value tables are needed. What is the net present value of Proposal X?

Simms Manufacturing is considering two alternative investment proposals with the following data: Note: Present value and future value tables are needed. Using the net present value model, which alternative should Simms select, and why?