b.

c.

Smith & Cramer, Computer Repair, is considering an investment in computer and network equipment costing $244,000. This equipment would allow them to offer new programming services to clients. The equipment will be depreciated on the straight-line basis over an eight-year period with an estimated residual value of $60,000. Using the accounting rate of return model, what is the minimum average annual operating income that must be generated from this investment in order to achieve an 18% accounting rate of return? O A. $10,800 O B. $54,720 O C. $43,920 OD. $33,120 Coyne Corporation is evaluating a capital investment opportunity. This project would require an initial investment of $32,000 to purchase equipment. The equipment will have a residual value at the end of its life of $2,000. The useful life of the equipment is 5 years. The new project is expected to generate additional net cash inflows of $25,000 per year for each of the five years. Coyne's required rate of return is 16%. The net present value of this project is closest to: E: (Click the icon to view the present value of $1 table.) (Click the icon to view the present value of annuity of $1 table.) Data Table - x O A. $49,850 O B. $67,570. O C. $50,802. OD. $15,602 Present Value of $1 Periods 3 4 5 6 10% 0.751 0.683 0.621 0.564 12% 0.712 0.636 0.567 0.507 14% 0.675 0.592 0.519 0.456 16% 0.641 0.552 0.476 0.410 Data Table x Present Value of Annuity of $1 Periods 10% 3 2.487 4 3.170 5 3.791 6 4.355 12% 2.402 3.037 3.605 4.111 14% 2.322 2.914 3.433 3.889 16% 2.246 2.798 3.274 3.685 The Pantry Vending Machine Company is looking to expand its business by adding a new line of vending machines. The management team is considering expanding into either soda machines or snack machines. Following is the relevant financial data relating to the decision: Soda Snack Machines Machines Investment $74,000 $65,000 Useful life (years) 4 10 Estimated annual net cash inflows for useful life $30,000 $17,000 Residual value $10,000 $5,000 Depreciation method Straight-line Straight-line Required rate of return 10% 10% What is the net present value for the soda machines? (Click the icon to view the present value of $1 table.) Data Table - - Data Table A. $114,000 O B. $27,930 O C. $(101,930) OD. $14,270 Present Value of $1 Periods 4 5 6 7 6% 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 8% 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 10% 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 12% 0.636 0.567 507 0.452 0.404 0.361 0.322 0.287 0.257 14% 0.592 0.519 456 0.400 0.351 0.308 0.270 0.237 0.208 Present Value of Annuity of $1 Periods 6% 4 3.465 5 4.212 4.917 7 5.582 8 6.210 9 6.802 10 7.360 11 7.887 12 8.384 8% 3.312 3.993 4.62 5.206 5.747 6.247 6.710 7.139 7.536 10% 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 12% 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 14% 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.553 5.660 8 9 10 11 12