1. The management of Penfold Corporation is considering the purchase of a machine that would cost $300,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $70,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to

Multiple Choice

• $(47,650)

• $(6,650)

• $(117,650)

• $(299,997)

2. Crowl Corporation is investigating automating a process by purchasing a machine for $792,900 that would have a 9 year useful life and no salvage value. By automating the process, the company would save $132,500 per year in cash operating costs. The new machine would replace some old equipment that would be sold for scrap now, yielding $21,100. The annual depreciation on the new machine would be $88,100. The simple rate of return on the investment is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)

Multiple Choice

• 11.11%

• 16.71%

• 5.75%

• 5.11%

3. Joanette, Inc., is considering the purchase of a machine that would cost $630,000 and would last for 9 years, at the end of which, the machine would have a salvage value of $53,000. The machine would reduce labor and other costs by $113,000 per year. Additional working capital of $7,000 would be needed immediately, all of which would be recovered at the end of 9 years. The company requires a minimum pretax return of 12% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 12B-1 and Exhibit 12B-2 to determine the appropriate discount factor(s) using the tables provided.

Required:

Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.)

4. The management of Nixon Corporation is investigating purchasing equipment that would cost $554,000 and have a 7 year life with no salvage value. The equipment would allow an expansion of capacity that would increase sales revenues by $382,000 per year and cash operating expenses by $220,000 per year. (Ignore income taxes.)

Required:

Determine the simple rate of return on the investment. (Round your answer to 1 decimal place.)