Reference no: EM132559141

Question 1: The management of Ro Corporation is investigating automating a process. Old equipment, with a current salvage value of $30,000, would be replaced by a new machine. The new machine would be purchased for $396,000 and would have a 6 year useful life and no salvage value. By automating the process, the company would save $137,000 per year in cash operating costs. The simple rate of return on the investment is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)

Multiple Choice

A. 19.4%

B. 17.9%

C. 34.6%

D. 16.7%

Question 2: Perkins Corporation is considering several investment proposals, as shown below:

Investment Proposal                                    A                   B                   C             D

Investment required                           $104,000       $130,000       $78,000     $97,500

Present value of future net cash flows   $124,800      $195,000        $109,200    $192,000

If the project profitability index is used, the ranking of the projects from most to least profitable would be:

Multiple Choice

A. D, B, C, A

B. B, D, C, A

C. B, D, A, C

D. A, C, B, D