1.Blue Spruce Corp. has an 8% required rate of return. It's considering a project that would provide annual cost savings of $70000 for 5 years. The most that Johnson would be willing to spend on this project is

Year Present Value PV of an Annuity

of 1 at 8% of 1 at 8%

1 0.926 0.926

2 0.857 1.783

3 0.794 2.577

4 0.735 3.312

5 0.681 3.993

$176274.

$47670.

$231840.

$279510.

2.Concord, Inc. is considering purchasing equipment costing $48000 with a 6-year useful life. The equipment will provide annual cost savings of $12000 and will be depreciated straight-line over its useful life with no salvage value. Concord 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 net present value of this investment?

$24000

$5832

$4260

$2771

3.Use the following table,

Present Value of an Annuity of 1

Period 8% 9% 10%

1 0.926 0.917 0.909

2 1.783 1.759 1.736

3 2.577 2.531 2.487

A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $298658 and is expected to generate cash inflows of $118000 each year for three years. The approximate internal rate of return on this project is???

10%.

the IRR on this project cannot be approximated.

8%.

9%.