Question
31.) Newport Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase
31.)
Newport Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $423,440. The equipment will have an initial cost of $1,896,000 and have a 12 year life. There is no salvage value for the equipment. What is the accounting rate of return? Ignore income taxes. |
22.33%
44.66%
14.00%
8.33%
32.)
Heidi Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $138,000 over its estimated life, while the total cost to buy the equipment will be $84,000 over its estimated life. At Heidis required rate of return, the net present value of the cost of leasing the equipment is $77,000 and the net present value of the cost of buying the equipment is $71,000. Based on financial factors, Heidi should |
lease the equipment, saving $6,000 over buying.
lease the equipment, saving $54,000 over buying.
buy the equipment, saving $54,000 over leasing.
buy the equipment, saving $6,000 over leasing.
33.)
You will need at least $5,300 in four years and your friend says she can either loan you $5,300 all at once four years from now or she can deposit $1,325 in your savings account at the end of each year for the next four years. Your savings account earns 10% interest, compounded annually. Which option would be worth more to you four years from now, and how much more? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Round your FV factor to 4 decimal places and final answer to the nearest dollar amount.) |
The annual deposits will be worth $849 more than the $5,300 in four years.
The $5,300 in four years will be worth $657 more than the annual deposits.
The $5,300 in four years will be worth $849 more than the annual deposits.
The annual deposits will be worth $657 more than the $5,300 in four years.
34.)
Newport Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $271,000. The equipment will have an initial cost of $2,439,000 and have a 8 year life. There is no salvage value for the equipment. What is the payback period? |
0.89 years
9.00 years
4.24 years
8.00 years
35.)
Byron Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $111,000. The equipment will have an initial cost of $475,000 and have a 5 year life. The salvage value of the equipment is estimated to be $79,000. If the hurdle rate is 10%, what is the approximate net present value? Ignore income taxes. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Round your PV factors to 4 decimal places and final answer to the nearest dollar amount.) |
zero
positive $79,000
negative $5,170
positive $475,000
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