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11-115
34.
Correl Corporation has provided the following data concerning an investment project that
it is considering:
Initial investment
$190,000
Annual cash flow
$75,000
per
year
Salvage value at the end
of the project
$25,000
The life of the project is 4 years. The company's discount rate is 15%. The net present
value of the project is closest to:
35.
Bullinger Corporation has provided the following data concerning an investment project
that it is considering:
Initial investment
$470,000
Annual cash flow
$134,000
per
year
Salvage value at the end
of the project
$27,000
Expected life of the
project
4
years
Discount rate
14%
The net present value of the project is closest to:
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36.
Naomi Corporation has a capital budgeting project that has a negative net present value of
$36,000. The life of this project is 6 years. Naomi's discount rate is 20%. By how much
would the annual cash inflows from this project have to increase in order to have a
positive net present value?
37.
Peter wants to buy a computer which he expects to save him $4,000 each year in
bookkeeping costs. The computer will last for five years, and at the end of five years it will
have no salvage value. If Peter's required rate of return is 12%, what is the maximum price
Peter should be willing to pay for the computer now?
38.
The following data on a proposed investment project have been provided:
Cost of equipment
$50,000
Working capital required
$30,000
Salvage value of equipment
$0
Annual cash inflows from the
project
$20,000
Required rate of return
20%
Life of the project
8 years
The working capital would be released for use elsewhere at the end of the project. The
net present value of the project is closest to:
39.
Zabarkes Corporation is considering a capital budgeting project that would require an
initial investment of $640,000 and working capital of $79,000. The working capital would
be released for use elsewhere at the end of the project in 3 years. The investment would
generate annual cash inflows of $205,000 for the life of the project. At the end of the
project, equipment that had been used in the project could be sold for $29,000. The
company's discount rate is 7%. The net present value of the project is closest to:
40.
Riveros, Inc., is considering the purchase of a machine that would cost $120,000 and
would last for 8 years. At the end of 8 years, the machine would have a salvage value of
$29,000. The machine would reduce labor and other costs by $25,000 per year. Additional
working capital of $9,000 would be needed immediately. All of this working capital would
be recovered at the end of the life of the machine. The company requires a minimum
pretax return of 18% on all investment projects. The net present value of the proposed
project is closest to:
41.
Kingsolver Corporation has provided the following data concerning an investment project
that it is considering:
Initial investment
$450,000
Working capital
$16,000
Annual cash flow
$133,000
per
year
Salvage value at the
end of the project
$6,000
Expected life of the
project
3
years
Discount rate
8%
The working capital would be released for use elsewhere at the end of the project. The
net present value of the project is closest to:
42.
Schoultz Corporation has provided the following data concerning an investment project
that it is considering:
Initial investment
$700,000
Annual cash flow
$266,000
per year
The life of the project is 4 years. The company's discount rate is 12%. The net present
value of the project is closest to:
43.
Sturn Corporation purchased a machine with an estimated useful life of seven years. The
machine will generate cash inflows of $9,000 each year over the next seven years. If the
machine has no salvage value at the end of seven years, if Stutz's discount rate is 10%,
and if the net present value of this investment is $17,000 then the purchase price of the
machine was closest to:
44.
Mujalli Corporation is considering a capital budgeting project that would require an initial
investment of $200,000. The investment would generate annual cash inflows of $64,000
for the life of the project, which is 4 years. At the end of the project, equipment that had
been used in the project could be sold for $10,000. The company's discount rate is 9%.
The net present value of the project is closest to:
45.
Dul Corporation has provided the following data concerning an investment project that it is
considering:
Initial investment
$170,000
Working capital
$64,000
Annual cash flow
$60,000
per
year
Salvage value at the end of the
project
$18,000
The working capital would be released for use elsewhere at the end of the project in 3
years. The company's discount rate is 7%. The net present value of the project is closest
to:
46.
Tangen Corporation is considering the purchase of a machine that would cost $380,000
and would last for 6 years. At the end of 6 years, the machine would have a salvage value
of $80,000. By reducing labor and other operating costs, the machine would provide annual
cost savings of $104,000. The company requires a minimum pretax return of 14% on all
investment projects. The net present value of the proposed project is closest to:
47.
Valotta Corporation has provided the following data concerning an investment project that
it is considering:
Initial investment
$690,000
Working capital
$70,000
Annual cash flow
$283,000
per
year
Salvage value at the end of the
project
$21,000
Expected life of the project
4
years
Discount rate
11%
The working capital would be released for use elsewhere at the end of the project. The
net present value of the project is closest to:
48.
Baker Corporation is considering buying a new donut maker. This machine will replace an
old donut maker that still has a useful life of 4 years. The new machine will cost $3,500 a
year to operate, as opposed to the old machine, which costs $3,900 per year to operate.
Also, because of increased capacity, an additional 10,000 donuts a year can be produced.
The company makes a contribution margin of $0.15 per donut. The old machine can be
sold for $6,000 and the new machine costs $28,000. The incremental annual net cash
inflows provided by the new machine would be:
49.
Bevans Corporation is considering a capital budgeting project that would require an initial
investment of $190,000. The investment would generate annual cash inflows of $58,000
for the life of the project, which is 4 years. The company's discount rate is 7%. The net
present value of the project is closest to:
50.
The following data pertain to an investment proposal:
Cost of the investment
$30,000
Annual cost savings
$9,000
Estimated salvage value
$4,000
Life of the project
5 years
Discount rate
12%
The net present value of the proposed investment is closest to:
51.
(Ignore income taxes in this problem) The management of Urbine Corporation is
considering the purchase of a machine that would cost $350,000, would last for 6 years,
and would have no salvage value. The machine would reduce labor and other costs by
$79,000 per year. The company requires a minimum pretax return of 14% on all investment
projects. The net present value of the proposed project is closest to:
52.
Vinup Corporation has provided the following data concerning an investment project that it
is considering:
Initial investment
$100,000
Working capital
$73,000
Annual cash flow
$40,000
per
year
Salvage value at the end of the
project
$29,000
The working capital would be released for use elsewhere at the end of the project in 4
years. The company's discount rate is 13%. The net present value of the project is closest
to:
53.
A project requires an initial investment of $70,000 and has a project profitability index of
0.932. The present value of the future cash inflows from this investment is:
54.
The management of Cantell Corporation is considering a project that would require an
initial investment of $47,000. No other cash outflows would be required. The present value
of the cash inflows would be $55,930. The profitability index of the project is closest to:
55.
The net present value of an investment project is $28,842 and its project profitability index
is 0.1518. The initial investment in this project was:
56.
The Gomez Corporation is considering two projects, T and V. The following information
has been gathered on these projects:
Project
T
Project
V
Initial investment needed
$112,500
$75,000
Present value of future cash
inflows
$168,000
$107,000
Useful life
10 years
10 years
Based on this information, which of the following statements is (are) true?
I. Project T has the highest ranking according to the project profitability index criterion.
II. Project V has the highest ranking according to the net present value criterion.
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57.
Villena Corporation is considering a project that would require an investment of $48,000.
No other cash outflows would be involved. The present value of the cash inflows would be
$52,800. The profitability index of the project is closest to:
