# 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 Nuts__Initial 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