1.) A company is considering replacing an old machine used in its production process. The old machine is fully depreciated and has no salvage value. The new machine would cost $750,000 and has an estimated useful life of six years. Depreciation expense will be $120,000 per year. At the end of year six, the equipment will be sold at book value. The company pays income taxes at a rate of 40%. Which of the choices represents the cash flow associated with the purchase of the equipment?

A.) Year 0: ($450,000) Years 1-5: $72,000 Year 6: $102,000

B.) Year 0: ($450,000) Years 1-5: $72,000 Year 6: $102,000

C.) Year 0: ($750,000) Years 1-5: $48,000 Year 6: $78,000

D.) Year 0: ($750,000) Years 1-5: $48,000 Year 6: $66,000

2.) Calculate the Internal Rate of Return for the following cash flows:

  Year          Cash Flow

• 0                ($155,000)
• 1-3                 41,000
• 4                    33,000
• 5-7                 31,000
• 8                    15,000

A.) (10.8%)

B.) 10.8%

C.) (15.6%)

D.) 15.6%

3.) Calculate the Internal Rate of Return for the following cash flows:  

       Year          Cash Flow

• 0                ($175,000)
• 1-3                 36,000
• 4                     51,000
• 5-7                 28,000
• 8                     12,000

?A.) 10.4%

B.) (10.4%)

C.) 13.6%

D.) (13.6%)

4.) Calculate the payback period in years for the following cash flows:

        Year          Cash Flow

• 0                ($22,000)
• 1-3                  3,000
• 4-6                  5,000

A.) 6.5 Years

B.) 5.6 Years

C.) 4.5 Years

D.) 5.4 Years

5.) Calculate the payback period in years for the following cash flows:

      Year          Cash Flow

• 0                ($18,000)
• 1-3                  2,000
• 4-6                  5,000

A.) 6.5 Years

B.) 5.6 Years

C.) 4.5 Years

D.) 5.4 Years

SmartExpert

(118)

Status NEW Posted 17 Jul 2017 12:07 AM My Price 5.00

A c-----------omp-----------any----------- is----------- co-----------nsi-----------der-----------ing----------- re-----------pla-----------cin-----------g a-----------n o-----------ld -----------mac-----------hin-----------e-----------

Attachments

file 1500252181-A company is considering replacing an old machine.docx preview (329 words )

1-----------.)Â----------- A -----------com-----------pan-----------y i-----------s c-----------ons-----------ide-----------rin-----------g r-----------epl-----------aci-----------ng -----------an -----------old----------- ma-----------chi-----------ne -----------use-----------d i-----------n i-----------ts -----------pro-----------duc-----------tio-----------n p-----------roc-----------ess-----------. T-----------he -----------old----------- ma-----------chi-----------ne -----------is -----------ful-----------ly -----------dep-----------rec-----------iat-----------ed -----------and----------- ha-----------s n-----------o s-----------alv-----------age----------- va-----------lue-----------. T-----------he -----------new----------- ma-----------chi-----------ne -----------wou-----------ld -----------cos-----------t $-----------750-----------,00-----------0 a-----------nd -----------has----------- an----------- es-----------tim-----------ate-----------d u-----------sef-----------ul -----------lif-----------e o-----------f s-----------ix -----------yea-----------rs.----------- De-----------pre-----------cia-----------tio-----------n e-----------xpe-----------nse----------- wi-----------ll -----------be -----------$12-----------0,0-----------00 -----------per----------- ye-----------ar.----------- At----------- th-----------e e-----------nd -----------of -----------yea-----------r s-----------ix,----------- th-----------e e-----------qui-----------pme-----------nt -----------wil-----------l b-----------e s-----------old----------- at----------- bo-----------ok -----------val-----------ue.----------- Th-----------e c-----------omp-----------any----------- pa-----------ys -----------inc-----------ome----------- ta-----------xes----------- at----------- a -----------rat-----------e o-----------f 4-----------0%.----------- Wh-----------ich----------- of----------- th-----------e c-----------hoi-----------ces----------- re-----------pre-----------sen-----------ts -----------the-----------

Not Rated(0)

• Buy Answer