6.Lawrence Corp is considering the purchase of a new piece of equipment. When discounted at a hurdle rate of 7%, the project has a net present value of $24,580. When discounted at a hurdle rate of 9%, the project has a net present value of ($29,000). The internal rate of return of the project is

between 7% and 9%.

between zero and 7%.

greater than 9%.

zero.

7.

Foster Inc. is trying to decide whether to lease or purchase a piece of equipment needed for the next ten years. The equipment would cost $45,000 to purchase, and maintenance costs would be $5,500 per year. After ten years, Foster estimates it could sell the equipment for $23,000. If Foster leases the equipment, it would pay $21,000 each year, which would include all maintenance costs. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)

If the hurdle rate for Foster is 12%, Foster should (Round your PV factors to 4 decimal places. Do not round intermediate calculations. Round your final answer to the nearest hundred.)

lease the equipment, as net present value of cost is about $46,300 less.

buy the equipment, as net present value of cost is about $45,000 less.

lease the equipment, as net present value of cost is about $50,000 less.

buy the equipment, as net present value of cost is about $50,000 less.

18 .Avocado Company has an operating income of $150,930 on revenues of $1,043,000. Average invested assets are $559,000, and Avocado Company has an 9% cost of capital.

What is the return on investment?

27%

18%

9%

14%

19 .Avocado Company has an operating income of $129,750 on revenues of $1,098,000. Average invested assets are $519,000, and Avocado Company has an 9% cost of capital.

What is the profit margin? (Round your answer to the nearest whole number.)

5-04-2011

12%

25%

9%

16%