Chicago Co. is interested in purchasing a machine that would improve its operational efficiency. The cost is $200,000 with an estimated residual value of $20,000 and a useful life of eight years. Cash inflows are expected to increase by $40,000 a year. The company's minimum rate of return is 10 percent. The present value of $1 for eight years at 10 percent is 0.467, and the present value of an annuity of $1 at 10 percent and eight years is 5.335.

45.	The project earns a rate of return of
	A)	greater than 10 percent.
	B)	less than 10 percent.
	C)	10 percent.
	D)	Unable to determine from the data given

50.

Omaha, Inc., is expected to have the following cash revenues and expenses (other than depreciation) in 20x7:

Sales	$80,000	Depreciation expense	$ 5,000
Selling, general, and		Income tax expense	3,000
administrative expenses		Cost of goods sold	45,000
(excluding depreciation)	10,000

Omaha's estimated 20x7 net cash flows are

A)

$12,000.

B)

$22,000.

C)

$19,000.

D)

$17,000.

15.

A company is considering a project with annual after-tax cash flows of $5,900.00 per year for six years. The company's cost of capital is 14 percent. Present and future value factors for a 14 percent interest rate for six years are as follows:

Future value of $1	2.195
Present value of $1	0.456
Future value of a series of equal payments	8.536
Present value of a series of equal payments	3.889

Using the net present value method, what is the maximum amount that the company should invest?

A)

$2,690.40

B)

$22,945.10

C)

$50,362.40

3.	During 20x6, America, Inc., produced, among other products, 11,400 cameras, incurring the following unit costs: $5 in direct materials, $3 in direct labor, $2 in variable overhead, $4 in fixed overhead, $0.50 in variable selling and administrative expenses, and $1 in fixed selling and administrative expenses. An outsider had offered to produce the cameras for $12 each. Assuming that the factory space would have been idle otherwise, acceptance of the outside offer would have
	A)	saved the company $22,100.
	B)	lost the company $17,100.
	C)	saved the company $37,100.
	D)	lost the company $11,400.

5.	In the capital investment decision process, the management accountant's responsibilities lie in the area of
	A)	detection of facility need.
	B)	methods of computation and final screening.
	C)	initial screening.
	D)	final selection of alternatives.

9.	Irrelevant costs are costs that are
	A)	sunk costs.
	B)	different among alternatives.
	C)	avoidable costs.
	D)	opportunity costs.

14.	Relevant costs in a sell or process-further decision include
	A)	both additional revenues and additional costs.
	B)	revenues after additional processing.
	C)	joint product costs.
	D)	costs of additional processing.

$12,950.50