1.

Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and a $5,000 salvage value. The machine will lower operating costs by $16,000 per year. The company's required rate of return is 17%. The net present value of this investment is closest to: Click here to viewExhibit 14B-1andExhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.

2.

Item2

Assume the following information for a capital budgeting proposal with a five-year time horizon:

Initial investment:
Cost of equipment (zero salvage value)	$	560,000
Annual revenues and costs:
Sales revenues	$	300,000
Variable expenses	$	130,000
Depreciation expense	$	50,000
Fixed out-of-pocket costs	$	40,000

Click here to viewExhibit 14B-1andExhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. This proposal's internal rate of return is closest to:

3

Assume that a company is considering purchasing a machine for $42,250 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. The profitability index for this investment is closest to: Click here to viewExhibit 14B-1andExhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.

4.

Assume the following information for a capital budgeting proposal with a five-year time horizon:

Initial investment:
Cost of equipment (zero salvage value)	$	430,000
Annual revenues and costs:
Sales revenues	$	300,000
Variable expenses	$	130,000
Depreciation expense	$	50,000
Fixed out-of-pocket costs	$	40,000

The payback period for this investment is closest to:

5

Assume the following information for a capital budgeting proposal with a five-year time horizon:

Initial investment:
Cost of equipment (zero salvage value)	$	470,000
Annual revenues and costs:
Sales revenues	$	300,000
Variable expenses	$	130,000
Depreciation expense	$	50,000
Fixed out-of-pocket costs	$	40,000

This proposal's simple rate of return is closest to:

6.

Ursus, Inc., is considering a project that would have a ten-year life and would require a $4,004,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.):

Sales				$	3,000,000
Variable expenses					1,850,000
Contribution margin					1,150,000
Fixed expenses:
Fixed out-of-pocket cash expenses	$	380,000
Depreciation		400,400			780,400
Net operating income				$	369,600

Click here to viewExhibit 14B-1andExhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 11%.

Required:

a. Compute the project's net present value.(Round your intermediate calculations and final answer to the nearest whole dollar amount.)

b. Compute the project's internal rate of return.(Round your final answer to the nearest whole percent.)

c. Compute the project's payback period.(Round your answer to 2 decimal place.)

d. Compute the project's simple rate of return.(Round your final answer to the nearest whole percent.)