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QUESTION 1 Matching - Indicate whether the item described is Relevant or Irrelevant to the future action being considered The cost of annual depreciation
QUESTION 1 Matching - Indicate whether the item described is Relevant or Irrelevant to the future action being considered The cost of annual depreciation on an existing machine used to generate a one time special order for a customer The cost of direct materials used to produce a one time special sales order for a customer The cost of removing an old building from a site where the new building will be built The original cost of a piece of equipment, when deciding whether to repair or replace the equipment A. Irrelevant B. Relevant QUESTION 2 Random Co. purchased a machine for $400,000 that has a five year life and will produce annual net cash inflows of $110,000 per year over the life of the machine. The present value of an annuity for 5 years at an 8% cost of capital is 3.993. Calculate the Net Present Value and Payback Period of this investment. Net present value $39,230 Payback period 3.6 years Net present value $150,000 Payback period 3.6 years Net present value $150,000 Payback period 4 years Net present value $39,230 Payback period 4 years
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