34. A company projects an increase in net income of $225,000 each year for the next five years if it invests $900,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $300,000. What is the annual rate of return on this investment? A) 25.0% B) 37.5% C) 50.0% D) 57.5% 35. Benaflek Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(450). Annual cost savings were: $5,000 for year 1; $4,000 for year 2; and $3,000 for year 3. The amount of the initial investment was Present Value PV of an Annuity Year of 1 at 12% of 1 at 12% 1 .893 .893 2 .797 1.690 3 .712 2.402 A) $10,239. B) $9,158. C) $10,058. D) $9,339. 36. Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Blue Project Gray Initial investment $400,000 $600,000 Annual net income 20,000 42,000 Net annual cash inflow 100,000 142,000 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 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 The net present value for Project Gray is A) $618,410. B) $182,912. C) $100,000. D) $18,410. 37. Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Blue Project Gray Initial investment $400,000 $600,000 Annual net income 20,000 42,000 Net annual cash inflow 100,000 142,000 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 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 The internal rate of return for Project Gray is approximately A) 10%. B) 11%. C) 12%. D) 9%