1the management of melchiori corporation is considering the

Assignment Help Managerial Accounting
Reference no: EM13378989

1. The management of Melchiori Corporation is considering the purchase of a machine that would cost $520,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $132,000 per year. The company requires a minimum pretax return of 12% on all investment projects.

Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

The present value of the annual cost savings of $132,000 is closest to: (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)
A. $191,448
B. $660,000
C. $1,215,462
D. $475,860

2. The capital budgeting method that recognizes the time value of money by discounting cash flows over the life of the project, using the company's required rate of return as the discount rate is called the:
A. the internal rate of return method.
B. the payback method.
C. simple rate of return method.
D. the net present value method.

3. The management of Serpas Corporation is considering the purchase of a machine that would cost $190,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $43,000 per year. The company requires a minimum pretax return of 10% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
A. $25,000
B. -$26,987
C. -$42,334
D. $35,907

4. An investment project for which the net present value is $300 would result in which of the following conclusions?
A. The rate of return of the investment project is greater than the required rate of return.
B. The net present value is too small; the project should be rejected.
C. The investment project should only be accepted if net present value is zero; a positive net present value indicates an error in the estimates associated with the analysis of this investment.
D. The net present value method is not suitable for evaluating this project; the internal rate of return method should be used.

5. If the internal rate of return is used as the discount rate in computing net present value, the net present value will be:
A. zero.
B. negative.
C. positive.
D. unknown.

6. Deibel Corporation is considering a project that would require an investment of $63,000. No other cash outflows would be involved. The present value of the cash inflows would be $79,380. The profitability index of the project is closest to: (Ignore income taxes.)
A. 0.74
B. 0.26
C. 0.21
D. 1.26

7. Gull Inc. is considering the acquisition of equipment that costs $510,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are:

Incremental net
cash flows
Year 1 $134,000
Year 2 $180,000
Year 3 $145,000
Year 4 $154,000
Year 5 $144,000
Year 6 $124,000

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables.

If the discount rate is 13%, the net present value of the investment is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

A. $82,129
B. $141,677
C. $595,261
D. $445,000

8. The Higgins Company has just purchased a piece of equipment at a cost of $310,000. This equipment will reduce operating costs by $50,000 each year for the next twelve years. This equipment replaces old equipment which was sold for $10,000 cash. The new equipment has a payback period of:
A. 6.2 years
B. 12.0 years
C. 18.0 years
D. 6.0 years

9. The length of time required to recover the initial cash outlay for a project is determined by using the:
A. the payback method.
B. discounted cash flow method.
C. the simple rate of return method.
D. the net present value method.

10. A piece of new equipment will cost $70,000. The equipment will provide a cost savings of $15,000 per year for ten years, after which it will have a $3,000 salvage value. If the required rate of return is 14%, the equipment's net present value is:
A. $(8,240)
B. $9,050
C. $23,888
D. $8,240

Reference no: EM13378989

Questions Cloud

1 the labor-leisure trade-offsheila : 1 the labor-leisure trade-offsheila must decide how to allocate her 24-hour day between non-wage
1calculate the annual total fixed costs for a combine that : 1calculate the annual total fixed costs for a combine that has an initial price of 300000 a useful life of 7 years a
As the mexican peso depreciates in value relative to the us : as the mexican peso depreciates in value relative to the u.s. dollar what happens to the price of u.s. goods in mexico?
Consider a country called hitech where new arrangements for : consider a country called hitech where new arrangements for making payments such as credit cards and atms have been
1the management of melchiori corporation is considering the : 1.the management of melchiori corporation is considering the purchase of a machine that would cost 520000 would last
Suppose there are 2 countries home and foreign two factors : suppose there are 2 countries home and foreign two factors of production capital and labor and two products food and
1 suppose that the economy is initially in a steady state : 1. suppose that the economy is initially in a steady state and that some of the nations capital stock is destroyed
The town of cinecity has two residents spielberg and lucas : the town of cinecity has two residents spielberg and lucas. the town currently funds its free outdoor movie projections
The new mayor has pledged to reduce air pollution and the : the new mayor has pledged to reduce air pollution and the only source of air pollution in the city are two cement

Reviews

Write a Review

 

Managerial Accounting Questions & Answers

  Value of abandonment option

High Roller Properties is considering building a new casino at a cost of $10 million at t = 0. What is the value (in thousands) of this abandonment option?

  Equivalent units-assigning costs using production cost

Calculate the cost per equivalent unit for each of the 3 cost items and in total. Calculate the cost of items completed in Aug and the cost of ending work in process inventory. Reconcile the sum of the 2 costs in part b to the sum of beginning WIP an..

  Collegepak company-cost volume profit analysis

CollegePak Company produced and sold 60,000 units throughout the year just ended at an average price of $20 per unit. Variable manufacturing costs were $8 per unit, and variable marketing costs were $4 per unit sold.

  Find the sloshs total dollar sales

Slosh expects to have $18,000 in fixed expenses next year. What would Slosh's total dollar sales have to be next year to generate a profit of $90,000?

  Discuss how overheads can be over- or under-applied

Discuss how overheads can be over- or under-applied and how the company should deal with the over- or under-application and evaluate whether ABC should be introduced. (Hint: remember to consider both the costs and benefits of any action recommended.)

  Stan sewell paid 50000 for a franchise that entitled him to

stan sewell paid 50000 for a franchise that entitled him to market software programs in the countries of the european

  Implementing the target costing approach

To implement target costing for a new product, companies often set up a cross-functional team with members from engineering, marketing, and costing accounting. Why is a cross-functional team desirable when implementing the target costing approach..

  Calculate the total projected sales for the quarter

Calculate the total projected sales for the quarter and At the local ice cream shop, there's a sign posted that reads, "If you don't receive a receipt, your next ice cream is free!" Is this an internal control procedure? If so, how does it work?

  Question 1 nbspritznbspcompany sells fine collectible

question 1 nbspritznbspcompany sells fine collectible statues and has implemented activity-based costing. costs in the

  Nashville corporation-short term and long term use

Nashville Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and long-run monthly usage of the staff hours for Operating Departments 1 and 2 follow.

  You have produced revenue and expense forecasts for the

you have produced revenue and expense forecasts for the four years of operation of the proposed investment in part 1.

  Evaluate the capital loss

Evaluate the capital loss

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd