Shields Company Has Gathered Data On A Proposal

Shields Company Has Gathered The Following Data On A Proposed Investme

Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes in this problem.) Investment required in equipment $680,000 Annual cash inflows $66,000 Salvage value $0 Life of the investment 20 years Required rate of return 7% The company uses straight-line depreciation. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment is closest to: 0.1 years 1.0 years 8.3 years 10.3 years (Ignore income taxes in this problem.) The management of Helberg Corporation is considering a project that would require a $291,000 investment and would last for 6 years. The annual net operating income from the project would be $139,000, which includes depreciation of $18,000. The scrap value of the project's assets at the end of the project would be $19,900. The cash inflows occur evenly throughout the year. The payback period of the project is closest to: 1.9 years 2.1 years 1.6 years 1.8 years The management of Londo Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines. The aircraft would have a useful life of 6 years. The company uses a discount rate of 20% in its capital budgeting. The net present value of the investment, excluding the intangible benefits, is −$474,840. (Ignore income taxes in this problem) How large would the annual intangible benefit have to be to make the investment in the aircraft financially attractive? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.) $474,840 $142,766 $79,140 $94,968 The management of Urbine Corporation is considering the purchase of a machine that would cost $410,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $67,000 per year. The company requires a minimum pre-tax return of 7% on all investment projects. (Ignore income taxes in this problem.) The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.) −$48,937 −$8,937 −$73,857 −$24,017 (Ignore income taxes in this problem.) The management of Stanforth Corporation is investigating automating a process. Old equipment, with a current salvage value of $12,000, would be replaced by a new machine. The new machine would be purchased for $402,000 and would have a 6-year useful life and no salvage value. By automating the process, the company would save $139,000 per year in cash operating costs. The simple rate of return on the investment is closest to: 18.5% 17.9% 34.6% 16.7% (Ignore income taxes in this problem.) Dube Corporation is considering the following three investment projects: Project D, Project E, Project F. Investment required $12,400 $55,000 $100,000. Present value of cash inflows $14,830 $78,950 $117,160. The profitability index of investment project E is closest to: 0.30 (Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $31,000 and will have a 6-year useful life and a $4,300 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $32,300 per year. The cost of these prescriptions to the pharmacy will be about $25,600 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is closest to: 4.6 years 4 years 5.3 years 3.8 years (Ignore income taxes in this problem.) Neighbors Corporation is considering a project that would require an investment of $324,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows: Sales $200,000; Variable expenses $27,000; Contribution margin $173,000; Fixed expenses: Salaries $34,000; Rents $47,000; Depreciation $42,000; Total fixed expenses $123,000; Net operating income $50,000. The scrap value of the project's assets at the end of the project would be $24,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to: 3.5 years 6.5 years 5.0 years 3.3 years Blaine Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $200,000 and would have a sixteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $30,000 per year to operate and maintain, but would save $62,000 per year in labor and other costs. The old machine can be sold now for scrap for $20,000. The simple rate of return on the new machine is closest to: 9.75% 31.00% 21.67% 10.83% (Ignore income taxes in this problem.) The Zinger Corporation is considering an investment that has the following data: Year 1, Year 2, Year 3, Year 4, Year 5. Investment $12,000, $3,800; Cash inflow $2,800, $2,800, $8,700, $4,800, $4,800. Cash inflows occur evenly throughout the year. The payback period for this investment is: 3 years 3.3 years 4 years 4.3 years (Round your answer to 1 decimal place) Assume you can invest money at a 14% rate of return. How much money must be invested now to withdraw $5,000 at the end of each year for 8 years, starting one year from now? $24,840 $23,195 $21,440 $1,755 The present value of a cash flow will never be less than the future dollar amount of the cash flow. True False (Ignore income taxes in this problem.) James just received an $8,000 inheritance check from the estate of his deceased wealthy uncle. James wants to set aside enough money today to pay for a trip in five years. If the trip is expected to cost $5,000, how much must James deposit now if the rate of return is 12% annually? $2,535 $2,835 $2,000 $5,000 How much would you have to invest today at 5% interest to receive an annuity of $1,400 per year for 5 years, with no remaining balance? Select the amount closest to your answer. $6,667 $6,061 $7,000 $1,098 You deposited $16,700 in an account earning 11% annually. What is the maximum you could withdraw each year for 6 years? $3,465 $3,089 $2,783 $3,947 Lucas Company recorded: repurchase of own stock $44,000; sale of investment $63,000; interest paid $17,000; dividends paid $73,000; collection of a loan $49,000; taxes paid $27,000. On the cash flow statement, what is the net cash from investing activities? $39,000 $(7,000) $(22,000) $112,000. Ansbro Corporation's balance sheet shows: Cash $99, $44; Accounts receivable; Inventory; Property, plant and equipment; Less: accumulated depreciation; Total assets; Liabilities and equity; including: Accounts payable $64, $73; Bonds payable; Common stock; Retained earnings; Total liabilities and equity; Net income was $106; cash dividends $26; no disposal of property. The net cash used in operating activities is: $137, $97, $169, −$31. It also shows a previous period balance of the same data but different values. Similarly, for another scenario with different figures, it asks about the net cash from investing activities. Many numerical analysis questions on cash flows, investments, and hypothesis testing follow, with multiple-choice options.