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You won the lottery and have a number of choices as to how to take the money. Which choice yields a greater present value? (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 Present Value of $1 Periods OA $84.000 (lump sum) 9 years from now using a 8% discount rate OB. $41,000 (lump sum) now OC. $80,000 (lump sum) 9 years from now using an 8% discount rate OD. $6,000 a year at the end of each of the next 8 years using a 8% discount rate 5 596 0.823 0.784 0746 0.711 0.677 0.645 6% 0.792 0.747 0.705 0.665 0.627 8% 0.735 0.681 0.630 0.583 0.540 0.500 0.592 Click to select your answer. You won the lottery and have a number of choices as to how to take the money. Which choice yields a greater present value? i Data Table 6% 8% Present Value of Annuity of $1 Periods 5% 4 3.546 5 4 .329 6 5.076 7 5 .786 6.463 9 7 .108 3.465 4.212 4.917 5.582 6.210 6.802 3.312 3.993 4.623 5.206 5.747 6.247 Print Done One disadvantage of the payback method is that it does not consider the time value of money. O O True False The ARR is the only method that uses accrual accounting figures and thus making it important to financial statement users. O O True False Interior Products, Inc. is evaluating the purchase of a new machine to use in its manufacturing process. The new machine would cost $38.000 and have a useful life of 5 years. At the end of the machine's life, would have a residual value of $2.500. Annual cost savings from the new machine would be $12.600 per year for each of the 5 years of its life. Interior Products, Inc. has a minimum required rate of return of 14% on all new projects. The net present value of the new machine would be closest to: (Round any intermediary calculations and your final answer to the nearest dollar) (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 O A $6,554 OB. $43,256 OC. $1,298 OD. $5,256 Present Value of $1 14% Click to select your 0.519 0.456 0.400 0.476 0.410 0.354 0.437 0.370 0.314 Interior Products, Inc. is evaluating the purchase of a new machine to use in its manufacturing process. The new machine would cost $38,000 and have a useful life of 5 years. At the end of the machine's life, it would have a residual value of $2,500. Annual cost savings from the now machine would be $12,600 per year for each of the 5 years of its life. Interior Products, Inc. has a minimum required rate of return of 14% on all new projects. The net present value of the new machine would be closest to: (Round any intermediary calculations and your final answer to the nearest dollar.) i Data Table Present Value of Annuity of $1 Periods 14% 16% 3.433 3274 18% 3.127 3.498 3.812 3.889 4 280 3.685 4029 Print Done The accounting rate of return method of analyzing capital budgeting decisions measures the average annual rate of return from using the asset over its entire life. O O True False Accounting Rate of Return is the only method used for analyzing capital investments that uses accrual basis accounting. O O True False Capital budgeting predictions must consider factors such as changing consumer preferences, competition, and government regulations. O O True False Reece Corporation is considering the purchase of a machine that would cost $28.298 and would have a useful life of 8 years. The machine would generate $6.100 of net annual cash inflows per year for each of the 8 years of its life. The intemal rate of return on the machine would be closest to (Click the icon to view the present value of $15 (Click the icon to view the present value of ann * Data Table Present Value of $1 Periods OA 10% OB. 14% OC. 12% OD. 16% 0.735 0.681 0.630 0.583 0.540 0.500 0463 10% 0.683 0.621 0.564 0.513 0467 0424 0.386 12% 0636 0.567 0.507 0.452 0.404 0.361 0.322 14% 0.592 0.519 0.456 0.400 0.351 0.308 0.270 Click to select your answer. Reece Corporation is considering the purchase of a machine that would cost $28,298 and would have a useful life of 8 years. The machine would generate $6,100 of net annual cash inflows per year for each of the 8 years of its life. The internal rate of return on the machine would be closest to i Data Table 12% 3.037 3.605 Present Value of Annuity of $1 Periods 8% 3.312 3.993 6 4 .623 5.206 5.747 6.247 6.710 10% 3.170 3.791 4.355 4.868 5.335 5.759 6.145 14% 2.914 3.433 3.889 4.288 4.839 4.946 5.216 4.564 4.968 5.328 5.650 Assuming an interest rate of 12%, the present value of $70,000 to be received 7 years from now would be closest to: B (Click the icon to view the present value of $1 table.) E (Click the icon i Data Table O A. $70,000. OB. $31,640 Present Value of $1 OC. $58,800 Periods 8% 10% 12% OD. $319,480. 0.681 0.621 0.567 0.630 0.564 0.507 0.583 0.513 0.452 0.540 0.467 0.404 0.500 0.424 0.361 Click to select your 0.463 0.386 0.322 14% 0.519 0.456 0.400 0.351 0.308 0.270 Assuming an interest rate of 12%, the present value of $70,000 to be received 7 years from now would be closest to: i Data Table 14% Present Value of Annuity of $1 Periods 8% 3.993 4.623 5.206 5.747 6.247 6.710 10% 3.791 4.355 4.868 5.335 5.759 6.145 12% 3.605 4.111 4.564 4.968 5.328 5.650 3.433 3.889 4.288 4.639 4.946 5.216 What will happen to the net present value (NPV) of a project if the discount rate is increased from 8% to 10%? O A. NPV will always decrease. OB. NPV will always increase. O C. The discount rate change will not affect NPV. OD. We cannot determine the direction of the effect on NPV from the information provided
