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

	Projects
	A	B	C
Initial investment	$90000	$130000	$170000
Present value of net cash flows	100000	120000	210000

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.

	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?

$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.

	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 internal rate of return for this investment?

10%

9%

11%

12%

7.

	Present Value of an Annuity of 1
Periods	8%	9%	10%
1	.926	.917	.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 $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:

	Project Soup	Project Nuts
Initial investment	$300000	$480000
Annual net income	30000	46000
Net annual cash inflow	110000	146000
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 cash payback period for Project Nuts is

10.00 years.

3.75 years.

3.29 years.

6.86 years.