Question 1:

Use the following table,

	Present Value of an Annuity of 1
Period	8%		9%		10%
1	.926		.917		.909
2	1.783		1.759		1.736
3	2.577		2.531		2.487

A company has a minimum required rate of return of 9%. It is considering investing in a project which costs $350,000 and is expected to generate cash inflows of $140,000 at the end of each year for three years. The net present value of this project is:

a) $354,340

b) $70,000

c) $35,436

d) $4,340

Question 2:

The area manager of the Red, White, and Brew Restaurants is considering two possible expansion alternatives. The required investments, expected controllable margins, and the ROIs of each are as follows:

Project		Investment		Controllable Margin		ROI
Phoenix		$120,000		$30,000		25%
Chicago		$540,000		$50,000		9.25%

The Red, White, and Brew segment has currently $2,000,000 in invested capital and a controllable margin of $250,000. Which one of following projects will increase the Red, White, and Brew division's ROI?

A) Only Pheonix.

B) Only Chicago.

C) Neither Pheonix or Chicago.

D) Both Pheonix and Chicago.

Question 3:

The following information is available for Halle Department Stores:

Average operating assets	$600,000
Controllable margin	60,000
Contribution margin	150,000
Minimum rate of return	8%

How much is Halle's residual income?