How much would you have to invest today in the bank at an interest rate of 8% to have an annuity of $6,000 per year for 8 years, with nothing left in the bank at the end of the 8 years? Select the amount below that is closest to your answer. (Ignore income taxes) Use the selections from the present value tables below: Present Value of $1 Present Value of an Annuity of $1 Period 4% 8% Period 4% 8% | 4 | 3.630 3.312 0.855 | 0.681 0.731 | 0.540 | 0.534 | 0.292 | | | | 8 16 | 6.733 | 5.747 | 11.652 || 8.851 11 16 All answers are rounded to the nearest dollar. O A. $3,240 O B. $1,752 O c. $53,106 O D. $34,482 Gold Corporation has gathered the following data on a proposed investment project: Amount Description Investment in depreciable equipment $280,000 $64,400 Annual net cash flows Life of the equipment Salvage value Discount rate 10 years $0.00 10% The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The simple rate of return on the investment would be: O A. 10% O B. 33% O C. 13% OD. 23% The following data pertain to an investment proposal (Ignore income taxes) Amount $94,000 $28,000 Description Cost of the investment Annual Cost Savings Estimated salvage value Life of the project Discount rate $12,000 10 years 18% Use the following selection from the present value tables, to calculate the net present value of the proposed investment. The net present value of the proposed investment is closest to: Present Value of $1 Present Value of an Annuity of $1 Period 9% 18% Period 9% | 18% 0.650 0.437 5 3.890 10 0.422 0.191 6.418 .129 3.127 4.494 5.353 20 | 0.178 | 0.037 209 O A. ($34,724) B. $34,124 O c. $29,540 O D. $31,832 The management at Blue Corporation is considering the following three investment projects (Ignore income taxes) Description Project X || Project Y || Project Z $42,000 $63,500 $84,200 Investment required || Present value of cash inflows $48,300 $71,000 $95,600 Rank the projects according to the profitability index, from most profitable to least profitable. A. Project X, Project Y, Project Z B. Project Y, Project Z, Project X oc. Project Z, Project Y, Project X D Project X, Project Z, Project Y The management at Dime Corporation is investigating purchasing equipment that would increase sales revenues by $527,000 per year and cash operating expenses by $339,800 per year. The equipment would cost $425,000 and have a 10 year life with no salvage value. Dime Corporation uses straight-line depreciation for all fixed assets. The simple rate of return on the investment is closest to (ignore income taxes): O A. 44.05% O O B. 54.05% O O O c. 27.46% O D. 34.05%
