1.The capital budgeting technique that indicates the profitability of a capital expenditure is the

net present value method.

profitability index method.

annual rate of return method.

internal rate of return method.

2.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 $178200 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

29.0%.

33.0%.

58.0%.

16.5%.