Question
1A)) A company wants to have $20,000 at the end of a ten-year period by investing a single sum now. How much needs to be
1A)) A company wants to have $20,000 at the end of a ten-year period by investing a single sum now. How much needs to be invested in order to have the desired sum in ten years, if the money can be invested at 12%? (Ignore income taxes.)
Multiple Choice
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$7,720 A
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$3,539.82 B
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$3,254.68 C
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$6,440 D
1B)) The management of L Corporation is considering a project that would require an investment of $285,000 and would last for 6 years. The annual net operating income from the project would be $115,000, which includes depreciation of $16,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to (Ignore income taxes.):
Multiple Choice
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2.2 years A
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2.3 years B
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1.9 years C
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2.5 years D
1C)) J Corporation has gathered the following data on a proposed investment project (Ignore income taxes.):
Investment required in equipment | $ | 39,000 | |
Annual cash inflows | $ | 9,600 | |
Salvage value of equipment | $ | 0 | |
Life of the investment | 15 | years | |
Required rate of return | 10 | % | |
The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment.
The simple rate of return for the investment (rounded to the nearest tenth of a percent) is:
Multiple Choice
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26.1% A
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17.9% B
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12.6% C
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31.2% D
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