24. Taylor Trucking is considering purchasing a new truck. It is expected the truck will increase annual revenues by $31,000 and increase annual expenses by $19,800 including depreciation. The truck will cost $110,000 and will have a $2,000 salvage value at the end of its useful life. Compute the annual rate of return.

20%

20.7%

10%

10.2%

23. Evergreen Co. is contemplating the purchase of a new machine that has expected annual net cash inflows of $25,000 over its 3 year life. The net present value of the investment is $3,275; assuming a 9% discount rate. The present value factors from the present value of 1 table and the present value of an annuity table are .772 and 2.531, respectively. Compute the profitability index.

1.15

1.05

0.77

1.19

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.

11. SwiftyCompany is considering two capital investment proposals. Estimates regarding each project are provided below:

	Project Soup	Project Nuts
Initial investment	$400000	$600000
Annual net income	12000	28000
Net annual cash inflow	90000	113000
Estimated useful life	5 years	6 years
Salvage value	0	0

The company requires a 10% rate of return on all new investments.

	Present Value of an Annuity of 1
Periods	9%	10%	11%	12%
5	3.89	3.791	3.696	3.605
6	4.486	4.355	4.231	4.111

The annual rate of return for Project Soup is

3.0%.

22.5%.

45%.

6%.

12. 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 $349278 and is expected to generate cash inflows of $138000 each year for three years. The approximate internal rate of return on this project is

9%.

10%.

8%.

the IRR on this project cannot be approximated.