1. Banderas Corporation is considering the purchase of a machine that would cost $330,000 and would last for 9 years. At the end of 9 years, the machine would have a salvage value of $79,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $59,000. The company requires a minimum pretax return of 12% on all investment projects. The net present value of the proposed project is closest to: A) $12,871 B) $63,352 C) -$15,648 D) $35,692 2. Tanna Corporation is considering three investment projects: O, P, and Q. Project O would require an investment of $38,000, Project P of $49,000, and Project Q of $91,000. No other cash outflows would be involved. The present value of the cash inflows would be $42,180 for Project O, $53,900 for Project P, and $91,910 for Project Q. Rank the projects according to the profitability index, from most profitable to least profitable. A) P,O,Q B) O,Q,P C) Q,O,P D) O,P,Q 3. Hull Inc. is considering the acquisition of equipment that costs $200,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are: Incremental net cash flows Year1.......................$77,000 Year2.......................67,000 Year3.......................51,000 Year4.......................64,000 Year5.......................50,000 Year6.......................68,000 The payback period of this investment is closest to: A) 2.8 years B) 2.6 years C) 3.1 years D) 5.0 years 4. An expansion at Huebschman, Inc., would increase sales revenues by $76,000 per year and cash operating expenses by $33,000 per year. The initial investment would be for equipment that would cost $196,000 and have a 7 year life with no salvage value. The annual depreciation on the equipment would be $28,000. The simple rate of return on the investment is closest to: A) 7.7% B) 14.3% C) 21.9% D) 19.7% 5. The management of Cerra Corporation is considering three investment projects I, J, and K. Project I would require an investment of $18,000, Project J of $42,000, and Project K of $85,000. The present value of the cash inflows would be $19,260 for Project I, $45,780 for Project J, and $91,800 for Project K. Rank the projects according to the profitability index, from most profitable to least profitable. A) J,K,I B) K,J,I C) K,I,J D) I,K,J