Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1) Assume the following information for three investment proposals: Proposal A Proposal B Proposal C Investment required $ (200,000 ) $ (255,000 ) $ (350,000

1) Assume the following information for three investment proposals:

Proposal A Proposal B Proposal C
Investment required $ (200,000 ) $ (255,000 ) $ (350,000 )
Present value of cash inflows 220,000 315,000 420,000
Net present value $ 20,000 $ 60,000 $ 70,000

Based on the profitability index, which of the following statements is true?

  • Proposal C is preferable to Proposal B

  • Proposal A is preferable to Proposal C

  • Proposal A is preferable to Proposal B

  • Proposal B is the highest ranked proposal among the three choices.

2) Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The internal rate of return on this investment is closest to:

  • 19%.

  • 21%.

  • 23%.

  • 24%.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Design Of Cost Management Systems

Authors: Robin Cooper, Robert S. Kaplan

2nd Edition

0135704170, 978-0135704172

More Books

Students also viewed these Accounting questions

Question

What are the components of a quality control chart?

Answered: 1 week ago