Q2.

If the net present value (NPV) of an investment proposal is positive, it would indicate that the:

Q5.

Olsen Inc. purchased a $600,000 machine to manufacture a specialty tap for electrical equipment. The tap is in high demand and Olsen can sell all that it could manufacture for the next 10 years. To encourage capital investments, the government exempts taxes on profits from new investments in this type of machinery. This legislation most likely will remain in effect in the foreseeable future. The equipment is expected to have 10 years of useful life and no salvage value at the end of this 10-year period. The firm uses straight-line depreciation. The net cash inflow is expected to be $146,000 each year. Olsen uses a discount rate of 10% in evaluating its capital investments.

The estimated net present value (NPV) of this proposed investment (rounded to the nearest thousand) is: (Note: the PV annuity factor from Table 2, Appendix C, 10%, 10 years is 6.145.)

TB MC Qu. 12-73 If the net present value (NPV) of an ... If the net present value (NPV) of an investment proposal is positive, it would indicate that the: Multiple Choice PV of after-tax cash outflows exceeds the PV of after-tax cash inflows. O Payback period is less than one-half the life of the project. Internal rate of return (IRR) is equal to the discount percentage used in the NPV calculation. PV index would be less than 100%. O Internal rate of return (IRR) for this project is greater than the discount rate used in the NPV computation. O TB MC Qu. 12-88 Olsen Inc. purchased a ... Olsen Inc. purchased a $600,000 machine to manufacture a specialty tap for electrical equipment. The tap is in high demand and Olsen can sell all that it could manufacture for the next 10 years. To encourage capital investments, the government exempts taxes on profits from new investments in this type of machinery. This legislation most likely will remain in effect in the foreseeable future. The equipment is expected to have 10 years of useful life and no salvage value at the end of this 10-year period. The firm uses straight-line depreciation. The net cash inflow is expected to be $146,000 each year. Olsen uses a discount rate of 10% in evaluating its capital investments. The estimated net present value (NPV) of this proposed investment (rounded to the nearest thousand) is: (Note: the PV annuity factor from Table 2, Appendix C, 10%, 10 years is 6.145.) Multiple Choice ($117,000). ($96,000). O $193,000. O $260,000. O $297,000