1. Arizona Company is considering two investments. The relevant data follows:

Project A Project B

Cost$205,010$259,770

Annual cash savings (end ofyear)$50,000$60,000

Terminal salvagevalue$0$0

Estimated useful life inyears55

Minimum desired rate ofreturn10%10%

Method ofdepreciationStraight-line Straight-line

Present Value Present Value

Of $1 of Ordinary

for 5 periods Annuity of $1

for 5 periods

5%0.78354.3295

6%0.74734.2124

7%0.7134.1002

8%0.68063.9927

10%0.62093.7908

12%0.56743.6048

14%0.51943.4331

Ignore taxes. Using the internal rate of return method, which project should be accepted?

A.	Project A only
B.	Project B only
C.	Both Project A and Project B
D.	Neither Project A nor Project B

2.

Lonestar Company pays taxes of 25% on their first $25,000 of taxable income and 30% on any taxable income in excess of $25,000. The company's current taxable income is $30,000. What is the marginal tax rate?

A.	65%
B.	30%
C.	25%
D.	40%

3.

Vanduser Company is considering the purchase of a labor saving piece of equipment with the following information:

Purchase cost ofequipment$432,000

Annual cost savings, excluding depreciation(end of year) $80,000

Terminal salvagevalue$10,000

Useful life ofequipment12 years

Required rate ofreturn10%

Taxrate30%

Depreciation method for taxpurposesStraight-line

Present value of ordinary annuity of one

at 10% for 12periods6.8137

Present value of one at 10% for 12periods0.3186

What is the net present value of the equipment?

A.	$124,458
B.	($50,443)
C.	$23,155
D.	$24,638