14.

A company projects an increase in net income of $184500 each year for the next five years if it invests $900000 in new equipment. The equipment has a 5-year life and an estimated salvage value of $300000. What is the annual rate of return on this investment?

20.5%

31.0%

30.0%

30.8%

15. A company is considering purchasing factory equipment that costs $480000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $106200 and annual operating expenses exclusive of depreciation expense are expected to be $39000. The straight-line method of depreciation would be used. If the equipment is purchased, the annual rate of return expected on this equipment is

3.0%.

14.0%.

28.0%.

1.5%.

16. Larkspur Corp. is considering the purchase of a piece of equipment that costs $20000. Projected net annual cash flows over the projects life are:

Year	Net Annual Cash Flow
1	$4000
2	10000
3	10000
4	7000

The cash payback period is

2.60 years.

2.50 years.

1.95 years.

2.55 years.

17. Splish Brothers Inc. is contemplating a capital investment of $108000. The cash flows over the projects four years are:

Expected Annual	Expected Annual
Year	Cash Inflows	Cash Outflows
1	$38000	$14000
2	63000	23000
3	73000	30000
4	65000	40000

The cash payback period is

3.10 years.

2.16 years.

3.04 years.

3.63 years.

18. If an asset costs $250000 and is expected to have a $50000 salvage value at the end of its 10-year life, and generates annual net cash inflows of $50000 each year, the cash payback period is

6 years.

5 years.

3 years.

4 years.