Week 4 question

1.Crane Inc had the following activity last year: Sales $295000; Cost of goods sold $175000; Depreciation expense $20000; other selling and administrative expenses $90000; income tax expense $2500. What was the estimated net cash flow for the year?$27500

$7500

$10000
$30000
2. Sheridan, Inc. is considering purchasing equipment costing $60000 with a 6-year useful life. The equipment will provide annual cost savings of $15000 and will be depreciated straight-line over its useful life with no salvage value. Sheridanrequires a 10% rate of return.

                     Present Value of an Annuity of 1              Period8%9%10%11%12%15%64.6234.4864.3554.2314.1113.784

What is the approximate net present value of this investment?

$7290
$30000
$3464
$5325
3.
3.Metlock, Inc. is considering purchasing equipment costing $ 46000 with a 6-year useful life. The equipment will provide annual cost savings of $11189 and will be depreciated straight-line over its useful life with no salvage value. Metlockrequires a 10% rate of return.

                     Present Value of an Annuity of 1              Period8%9%10%11%12%15%64.6234.4864.3554.2314.1113.784
What is the approximate internal rate of return for this investment?
12%
10%
11%
9%
4.
Present Value of an Annuity of 1Periods8%9%10%10.9260.9170.90921.7831.7591.73632.5772.5312.487

A company has a minimum required rate of return of 9%. It is considering investing in a project that costs $ 177000 and is expected to generate cash inflows of $ 72000 at the end of each year for three years. The net present value of this project is$ 36000.
$ 5232.
$ 18223.
$ 182232.
5. CheyenneCompany is considering two capital investment proposals. Estimates regarding each project are provided below:

Project SoupProject NutsInitial investment$ 460000$ 432000Annual net income3000046000Net annual cash inflow110000146000Estimated useful life5 years6 yearsSalvage value00

The company requires a 10% rate of return on all new investments.

Present Value of an Annuity of 1Periods9%10%11%12%53.893.7913.6963.60564.4864.3554.2314.111

The cash payback period for Project Nuts is2.96 years.
15.33 years.
5.75 years.
5.27 years.
6. If a project costing $ 81000 has a profitability index of 1 and the discount rate was 12%, then the present value of the net cash flows was
$ 81000.
less than $ 81000.
greater than $ 81000.
undeterminable.
7. A project has an annual rate of return of 15%. The project cost $ 60000, has a 5-year useful life, and has no salvage value. Straight-line depreciation is used. The annual net income, exclusive of depreciation, is
$ 23850.
$ 9000.
$ 21000.
$ 16500.
8. A project that cost $ 66000 has a useful life of 5years and a salvage value of $ 3000. The internal rate of return is 12% and the annual rate of return is 18%. The amount of the annual net income is
$ 4140.
$ 5670.
$ 6210.
$ 3780.
G

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