Question
1. Big Al's is considering the purchase of a capital investment costing $33,000. Annual cash savings of $8,000, with a present value at 14 present
1. Big Al's is considering the purchase of a capital investment costing $33,000. Annual cash savings of $8,000, with a present value at 14 present of $37,111, are expected for the next eight years. Given information, which of the following statements is true? a. This investment offers an actual rate of return of 14% b. This investment offers an actual rate of return of less than 14% c. This investment offers an actual rate of return of more than 14% d. This investment offers a negative rate of return 2. Mid-Town Products Inc. purchased equipment cost $150,000. Annual operating cash inflows are expected to be $26,000 each year for fifteen years. At the end of the equipment's life, the salvage value is expected to be $18,000. If Mid-Town's cost of capital is 14 percent, what is the net present value? (Ignore income taxes) a. $4,245 b. $2,212 c. $18,000 d. $23,592 3. Oakwood Inc. requires all capital investments to generate an internal rate of return of 16%. Oakwood is currently considering an investment that is expected to generate annual cash inflows of $15,000 for 7 years. The cost of the investment should not exceed: a.$16,800 b. $37,149 c. $60, 579 d. $105,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started