1. T or F : The project profitability index is used to compare the net present values of two investments that require different amounts of investment funds.

3. (Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $31,000 and will have a 6-year useful life and a $4,300 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $32,300 per year. The cost of these prescriptions to the pharmacy will be about $25,600 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is closest to:

A 3.8 years

B 4 years

C 4.6 years

D 5.3 years

6. Mankus Inc. is considering using stocks of an old raw material in a special project. The special project would require all 150 kilograms of the raw material that are in stock and that originally cost the company $2,346 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $7.90 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $7.20 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $74 for all 150 kilograms. What is the relevant cost of the 150 kilograms of the raw material when deciding whether to proceed with the special project?

A $1,185

B $1,080

C $1,165

D $1,006

9. Mercer Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $190,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $28,000 per year to operate and maintain, but would save $60,000 per year in labor and other costs. The old machine can be sold now for scrap for $19,000. The simple rate of return on the new machine is closest to: (Ignore income taxes in this problem.)

A 6.84%

B 7.60%

C 31.58%

D 15.20%