The following relates to a proposed equipment purchase: Initial investment Salvage value Estimated useful life Annual net cash flows Annual depreciation expense $ 140,200 $ 3,800 4 years $ 45,900 $ 34,100 The annual average investment amount used to calculate the accounting rate of return is: Multiple Choice $70,100 O $68,200 $35,050 O $72,000 0 $7,50 Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $14,900 and will produce cash flows as follows: End of Year 1 2 3 Investment A B $ 9,100 $ 0 9,100 0 9,100 27,300 The present value factors of $1 each year at 15% are: 1 2 3 0.8696 0.7561 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment B is: Multiple Choice O $3,050. a $(17,950). O $12,400. O $45,250. O $-8,153 Nestor Company is considering the purchase of an asset for $137,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Compute the break-even time (BET) period for this investment. (Round to two decimal places.) Annual Net Cash Present Value of $1 Flows at 12% Initial investment 1.0000 Year 1 $ 56,000 0.8929 Year 2 $ 56,000 0.7972 Year 3 $ 51,000 0.7118 Year 4 $ 51,000 0.6355 Year 5 $ 46,000 0.5674 Multiple Choice 2.82 years. O 2.61 years. 3.19 years. o 2.99 years. o 5.22 years. A company can buy a machine that is expected to have a three-year life and a $33,000 salvage value. The machine will cost $1,830,000 and is expected to produce a $203,000 annual income to be received at the end of each year. Annual depreciation expense is $597,000 per year. If a table of present values of $1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%? Multiple Choice $115,009 $592,929 o $637,760 $714,320 $1,945,009 Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $14,800 and will produce cash flows as follows: End of Year 1 2 3 Investment A B $ 9,200 $ 0 9,200 0 9,200 27,600 The present value factors of $1 each year at 15% are: 1 2 3 0.8696 0.7561 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832. The net present value (rounded to the nearest whole dollar) of Investment A is: Multiple Choice $18,147 . O $(14,800). O $12,800. O $(21,006). $6,205
