Use these present value tables to answer the questions that follow Below is a table for the present value of $1 at compound interest Year 6% 10% 12% 0.943 0.909 0.893 2 0.890 0.826 0.797 0.840 0.751 3 0.712 4 0.792 0.683 0.636 0.747 0.567 5 0.621 Below is a table for the present value of an annuity of $1 at compound interest 2 Year 6% 10% 12% 0.943 0.909 0.893 1.736 2 1.833 1.690 2.673 3 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 18. Using the tables above, what would be the present value of $15,000 to be received at the end of each of the next two years, assuming an earnings rate of 6%? a $27,495 b. $26,040 $30,000 C. d. $25,350 19. Using the tables above, what would be the present value of $8,000 to be received earnings a. $7,544 one year from today, assuming an rate of 12%? b. $7,120 c. $7,272 d. $7,144 20. Using the tables above, what is the present value of S6,000 to be received at the end of each of the next four years, assuming earnings rate of 10%? an $20,790 a. b. $19,020 c. $14,412 d. $25,272 21. Using the tables above, if an investment is made now for $20,000 that will generate a cash inflow of $7,000 a year for the next four years, what would be the present value of the investment cash inflows, assuming an earnings rate of 12%? S20,352 a. b. $3,969 c. $22,190 d. $21,259 22. The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which of the proposals (if any) meets or exceeds the company's policy of a minimum desired rate of return of 10% using the net present value method Each of the assets has an estimated useful life of 10 years The accountant has identified the following data Machine B Machine A Machine Present value of future cash flows computed using 10% rate of return Amount of initial investment Which of the investments are $305,000 300,000 $295,000 300,000 $300,000 300,000 acceptable? Machines A and C a. b. Machines B and C c. Machine B only d. Machine A only 23. The production department is proposing the purchase of an automatic insertion machine. It has identified three machines, each with an estimated life of 10 years. Which machine offers the best internal rate of return? Machine A $50,000 250,000 Machine B S 40,000 300,000 Machine C $75,000 500,000 Annual net cash flows Average investment a. Machine B only b. Machine C only c. Machines A and B d. Machine A only 24. Brunette Company is contemplating investing in a new is $180,000. The present value of the future cash flows generated by the project is $163,000. Should they invest in this project? a. yes, because the rate of return on the project exceeds the desired rate of return used to calculate the present value of the future cash flows piece of manufacturing machinery. The amount to be invested b. no, because the rate of return on the project is less than the desired rate of return used to calculate the present value of the future cash flows c. no, because net present value is +$17,000 yes, because the rate of return on the project is equal to the desired rate of return used to calculate the present value of the future cash flows d. 25. In capital rationing, standards. Which of the following evaluation methods are often used? a. cash payback method and average rate of return method b. average rate of return method and net present value method c. net present value method and cash payback method d. internal rate of retun method and net present value method an initial screening of altemative proposals is usually performed by establishing minimum SC 26. Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay of $109,332. Estimated cash flows are interest of 10%, 12% , 14% , and 15% are investment is annuity of $1 for four years at 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this expected to be S36,000 annually for four years. The present value factors for an a. 9% b. 10% c. 12% d. 3% 27. A company is contemplating investing $100,000. The present value of the future cash flows at the company's desired rate of return is $105,000. The IRR on the project is 12%. Which of the following statements is true? The project should not be accepted because the net present value is negative. b. The desired rate of return used to calculate the present value of the future cash flows is less than 12% c. The desired rate of return used to calculate the presemt value of the future cash flows is more than 12% d. The desired rate of return used to calculate the present value of the future cash flows is equal to 12% piece of manufacturing machinery. The amount to be invested is in a new a