1. Compound interest is the return on principal A) for one period. B) plus interest for two or more periods. C) only D) for one or more periods. 2. The cash payback period is computed by dividing the cost of the capital investment by the A) present value of the net income. B) annual net income. C) net annual cash inflow. D) present value of the cash inflow. McGoff Company deposits $20,000 in a fund at the end of each year for 5 years. The fund pays interest of 4% compounded annually. The balance in the fund at the end of 5 years is computed by multiplying A) $100,000 by 1.04. B) $20,000 by the future value of an annuity factor. C) $20,000 by the future value of 1 factor. D) $100,000 by 1.20. 3. A company is considering purchasing a machine that costs $400,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be S100,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used. The cash payback period on the machine is 4. A) 7.5 years. B) 6.5 years. C) 3.2 years. D) 8.0 years. 5. Ifyou are able to earn a 15% rate of return, what amount would you need to invest to have $15,000 one year from now? A) $13,044 B) $12,750 C) $14,852 D) $13,125