Question
45. The management of Retz Corporation is considering the purchase of a new machine costing $500,000. The company's desired rate of return is 10%. The
45. The management of Retz Corporation is considering the purchase of a new machine costing $500,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation:
Year | Income from Operations | Net Cash Flow | ||
1 | $100,000 | $200,000 | ||
2 | 80,000 | 170,000 | ||
3 | 50,000 | 130,000 | ||
4 | 10,000 | 80,000 | ||
5 | 10,000 | 80,000 |
The net present value for this investment is:
a.negative $150,000.
b.positive $24,170.
c.negative $24,170.
d.positive $150,000.
49. Diamond Inc.'s sales is $520,000, its operating income is $84,000, average total assets are $480,000, and average shareholders' equity is $200,000. Determine the company's return on shareholders' equity.
a.42.0%
b.22.6%
c.55.2%
d.36.5%
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