3. Tamarisk Inc. is comparing several alternative capital budgeting projects as shown below:

Using the profitability index, the projects rank as

A, B, C.

C, A, B.

A, C, B.

C, B, A.

4. Sunland, Inc. is considering purchasing equipment costing $30000 with a 6-year useful life. The equipment will provide annual cost savings of $9000 and will be depreciated straight-line over its useful life with no salvage value. Sunland requires a 10% rate of return.

What is the approximate net present value of this investment?

$9195

$10374

$24000

$8078

5. Monty, Inc. is considering purchasing equipment costing $50000 with a 6-year useful life. The equipment will provide annual cost savings of $12162 and will be depreciated straight-line over its useful life with no salvage value. Monty requires a 10% rate of return.

What is the approximate internal rate of return for this investment?

10%

9%

11%

12%

7.

A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $105116 and is expected to generate cash inflows of $42000 each year for three years. The approximate internal rate of return on this project is

11%.

less than the required 8%.

9%.

10%.

8. CullumberCompany is considering two capital investment proposals. Estimates regarding each project are provided below:

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

The cash payback period for Project Nuts is

10.00 years.

3.75 years.

3.29 years.

6.86 years.