1) Johnson Corp. has an 8% required rate of return. It's considering a project that would provide annual cost savings of $50,000 for 5 years. The most that Johnson would be willing to spend on this project is

Year Present Value of 1 at 8% PV of an Annuity of 1 at 8%

1 .926 .926

2 .857 1.783

3 .794 2.577

4 .735 3.312

5 .681 3.993

A) $165,600.

B) $125,910.

C)$199,650.

D)$34,050.

2) Mini Inc. is contemplating a capital project costing $47,019. The project will provide annual cost savings of $18,000 for 3 years and have a salvage value of $3,000. The company's required rate of return is 10%. The company uses straight-line depreciation.

Year	Present Value of 1 at 10%		PV of an Annuity of 1 at 10%
1	.909		.909
2	.826		1.736
3	.751		2.487

This project is

A) unacceptable because it has a negative NPV.

B) acceptable because it has a zero NPV.

C) unacceptable because it earns a rate less than 10%.

D) acceptable because it has a positive NPV.

3) Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return.

	Present Value of an Annuity of 1
Period	8%	9%	10%	11%	12%	15%
6	4.623	4.486	4.355	4.231	4.111	3.784

What is the approximate internal rate of return for this investment?

A) 10%

B) 11%

C) 12%

D) 9%

4) A company uses 20,000 pounds of materials for which it paid $6.00 a pound. The materials price variance was $15,000 unfavorable. What is the standard price per pound?

A) $5.25

B) $6.00

C) $6.75

D) $0.75