QUESTION 1 The expected average annual rate of return for a proposed investment of $3,000,000 in an asset with a useful life of 20 years, no residual value and an expected total income of $6,000,000 is: 25% 18% 40% 20%

QUESTION 2 The management of Ritz Corporation is considering the purchase of a new machine costing $500,000 with no residual value The company's desired rate of return is 10%. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Net income Net cash flow 1 $100,000 $200,000 2 80,000 170,000 3 50,000 130,000 4 10,000 20,000 5 10,000 80,000 The cash payback period for this investment is: 5 years 3 years 2 years 4 years

QUESTION 3 The management of Ritz Corporation is considering the purchase of a new machine costing $500,000 with no residual value The company's desired rate of return is 10%. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Net income Net cash flow 1 $100,000 $200,000 2 80,000 170,000 3 50,000 130,000 4 10,000 20,000 5 10,000 80,000 Using the partial present value tables in your text, what is the net present value? -$50,000 -$19,730 -$16,810 -$100,000

QUESTION 4 Under the net present value method - If an investment yields a net present value of zero, the investment would be considered: acceptable. unacceptable. Neither acceptable or unacceptable. Cannot determine based on the data provided.

QUESTION 5 A series of equal cash flows at fixed intervals is called a(n): net cash flow annuity present value overpayment

QUESTION 6 An analysis of a proposal by the net present value method indicated that the present value of the future cash flows exceeded the amount of the investment. Which of the following statements can be determined from this analysis? The proposal is desirable and the rate of return expected exceeds the minimum rate used for the analysis. The proposal is desirable and the rate of return expected is less than the minimum rate used for the analysis. The proposal is undesirable and the rate of return expected exceeds the minimum rate used for the analysis. The proposal is undesirable and the rate of return expected is less than the minimum rate used for the analysis.

QUESTION 7 What is the present value today of $1,000 to be received at the end of each year for ten consecutive years assuming a 6% rate of interest? Refer to the partial present value tables in your text. $9,000 $5,022 $4,355 $7,360

QUESTION 8 What is the internal rate of return on a $37,000 investment that is expected to yield $9,000 in cash flows over a six-year period? 6% 10% 12% 15%

QUESTION 9 If a company's minimum required rate of return is 10% and an investment was calculated to have an internal rate of return of 12%, then: the investment would be acceptable. the investment would be unacceptable. the investment will definitely return 12%. the company's minimum required rate of return is too low.

QUESTION 10 In capital rationing, an initial screening of alternative proposals is usually performed by establishing minimum standards. Which of the following evaluation methods are normally used? Cash payback method and internal rate of return methods. Cash payback method and average rate of return methods. Internal rate of return and net present value methods. Net present value and cash payback methods.