1.Danworth Company is contemplating whether to use MACRS depreciation or straight-line depreciation for a plant asset. The following information is available:

MACRSStraight-linePresent Value of

DepreciationDepreciation One At 12%

Year1$13,333$10,0000.8929

Year2$17,780$10,0000.7972

Year3$5,924$10,0000.7118

Year4$2,964$10,0000.6355

Over the four years examined, how much did Danworth Company gain by using MACRS depreciation instead of straight-line depreciation for the plant asset? The tax rate is 40%. (Find the present value.)

A.	$9,178
B.	$722
C.	$2,976
D.	$1,806

2.Dolly Madison Company is considering two investments. The relevant data follows:

Project A Project B

Cost$200,000 $300,000

Annual cash savings(end ofyear)$50,692$60,995

Terminal salvagevalue$50,000$70,000

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

Ignoring taxes, the internal rate of return for Project A is approximately ________.

A.	14%
B.	12%
C.	10%
D.	8%

3. Valesano Company is considering a project with the following information:

Project 1

Cost$4,000

Annual cash operating savings(end ofyear)$2,000

Terminalsalvage$0

Useful life inyears3

Required rate ofreturn10%

Present value of one for 3 periods at10%0.7513

Present value of ordinary annuity of one for

3 periods at10%2.4869

Ignoring taxes, what is the lowest level of annual cash operating savings that will result in a positive net present value?

A.	$1,600
B.	$1,550
C.	$2,000
D.	$1,608

4.Zebron Company is considering the following investment:

Initial capitalinvestment$200,000

Estimated usefullife3 years

Estimated disposal value in 3years$1,000

Estimated annual savings in cash operating costs(end of year) $100,000

Minimum desired rate ofreturn10%

Present value of ordinary annuity of one, 3 periods at10%2.4869

Present value of one, 3 periods at10%0.7513

Assume straight-line depreciation is used. Ignore income taxes. The net present value of the investment is ________.

A.	$101,000
B.	$49,690
C.	$48,690
D.	$49,441