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77.
Alicia is considering adding toys to her gift shop. She estimates that the
cost of inventory will be $7,500. The remodeling expenses and shelving
costs are estimated at $1,800. Toy sales are expected to produce net cash
inflows of $2,300, $2,900, $3,200, and $3,400 over the next four years,
respectively. Should Alicia add toys to her store if she assigns a three-year
payback period to this project? Why or why not?
78.
A project has an initial cost of $18,400 and produces cash inflows of $7,200,
$8,900, and $7,500 over three years, respectively. What is the discounted
payback period if the required rate of return is 16 percent?
79.
Scott is considering a project that will produce cash inflows of $2,100 a year
for 4 years. The project has a 12 percent required rate of return and an
initial cost of $6,000. What is the discounted payback period?
80.
J&J Enterprises is considering an investment that will cost $318,000. The
investment produces no cash flows for the first year. In the second year, the
cash inflow is $47,000. This inflow will increase to $198,000 and then
$226,000 for the following two years, respectively, before ceasing
permanently. The firm requires a 15.5 percent rate of return and has a
required discounted payback period of three years. Should the project be
accepted? Why or why not?
81.
The Square Box is considering two projects, both of which have an initial
cost of $35,000 and total cash inflows of $50,000. The cash inflows of
project A are $5,000, $10,000, $15,000, and $20,000 over the next four
years, respectively. The cash inflows for project B are $20,000, $15,000,
$10,000, and $5,000 over the next four years, respectively. Which one of the
following statements is correct if The Square Box requires a 13 percent rate
of return and has a required discounted payback period of 3.5 years?
82.
The Green Fiddle is considering a project that will produce sales of $87,000
a year for the next 4 years. The profit margin is estimated at 6 percent. The
project will cost $90,000 and will be depreciated straight-line to a book
value of zero over the life of the project. The firm has a required accounting
return of 11 percent. This project should be _____ because the AAR is _____
percent.
83.
A project has an initial cost of $32,000 and a 3-year life. The company uses
straight-line depreciation to a book value of zero over the life of the project.
The projected net income from the project is $1,200, $2,300, and $1,800 a
year for the next 3 years, respectively. What is the average accounting
return?
84.
A project produces annual net income of $46,200, $51,800, and $62,900
over its 3-year life, respectively. The initial cost of the project is $675,000.
This cost is depreciated straight-line to a zero book value over three years.
What is the average accounting rate of return if the required discount rate is
14.5 percent?
85.
A project has average net income of $5,900 a year over its 6-year life. The
initial cost of the project is $98,000 which will be depreciated using
straight-line depreciation to a book value of zero over the life of the project.
The firm wants to earn a minimum average accounting return of 11.5
percent. The firm should _____ the project because the AAR is _____
percent.
86.
Colin is analyzing a project and has gathered the following data. Based on
this data, what is the average accounting rate of return? The project's
assets will be depreciated using straight-line depreciation to a zero book
value over the life of the project.
87.
You are analyzing the following two mutually exclusive projects and have
developed the following information. What is the crossover rate?
88.
Boston Chicken is considering two mutually exclusive projects with the
following cash flows. What is the crossover rate? If the required rate of
return is lower than the crossover rate, which project should be accepted?
89.
You are analyzing a project and have gathered the following data:
Based on the profitability index of _____ for this project, you should _____
the project.
90.
You are analyzing a project and have gathered the following data:
Based on the internal rate of return of _____ percent for this project, you
should _____ the project.
91.
You are analyzing a project and have gathered the following data:
Based on the net present value of _____, you should _____ the project.
92.
You are analyzing a project and have gathered the following data:
Based on the payback period of _____ years for this project, you should
_____ the project.
