All of the Following Are Capital Investment Decisions Except

All of the following are capital investment decisions except:

acquiring $410,000 of common stock.
purchasing equipment for $40,800.
paying $509,000 to renovate a restaurant.
buying a $4,025,000 manufacturing plant.

Tompkins Company has two investment opportunities. Both investments cost $5,000 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below:

Investment I / Investment II
Period 1 / $ / 1,700 / $ / 4,540
Period 2 / 1,700 / 3,120
Period 3 / 3,120 / 3,120
Period 4 / 5,680 / 1,420
Total / $ / 12,200 / $ / 12,200

Select the correct statement.

Time value of money techniques are not useful for comparing these investments.
Tompkins should choose Investment I because of the time value of money.
Tompkins should be indifferent between the two investments because they provide the same total cash inflows.
Tompkins should choose Investment II because it generates more immediate cash inflows.

What amount of cash must be invested today in order to have $31,000 at the end of one year assuming the rate of return is 9%? (Do not round your PV factors. Round your final answer to 2 decimal places.)

$28,440.37
$27,900.00
$28,210.00
$26,092.08

What amount of cash would result at the end of one year, if $26,000 is invested today and the rate of return is 9%?(Do not round your PV factors.)

$26,000
$28,080
$28,340
$23,660

Darlene projects that she can get $170,000 cash per year for 5 years on a real estate investment project. If Darlene wants to earn a rate of return of 9%, what is the maximum that she should pay for the investment? (Do not round your PV factors. Round your answer to the nearest dollar.)

$661,241
$773,500
$550,752
$110,488

Henry has $570,000 to invest in a 5 year annuity. Assuming the time value of money is 9%, what amount will Henry receive in cash each year? (Do not round your PV factors. Round your answer to the nearest dollar.)

$114,000
$124,260
$146,543
None of these answers are correct.

Which of the following cash flow patterns represents of an annuity?

Year 1 / Year 2 / Year 3 / Year 4 / Year 5 / Year 6
A) / $ / 1,260 / $ / 1,260 / $ / 1,260 / $ / 1,260 / $ / 1,260 / $ / 1,260
B) / $ / 890 / $ / -0- / $ / 890 / $ / 890 / $ / 890 / $ / -0-
C) / $ / 230 / $ / 330 / $ / 430 / $ / 530 / $ / 630 / $ / 730

A
B
C
Any of the answers can represent an annuity.

Chartreuse Company has two investment opportunities. Both investments cost $5,300 and will provide the following net cash flows:

Year / Investment A / Investment B
1 / $3,150 / $3,150
2 / 3,150 / 4,180
3 / 3,150 / 2,150
4 / 3,150 / 1,060

The total present value of Investment A's cash flows assuming an 10% minimum rate of return is(Do not round your PV factors and intermediate calculations. Round your answer to the nearest whole dollar.):

$3,150.
$8,658.
$9,985.
$10,984.

Henrico Company has two investment opportunities. Both investments cost $5,800 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below:

Investment I / Investment II
Period 1 / $ / 1,400 / $ / 1,400
Period 2 / 1,400 / 2,480
Period 3 / 2,400 / 3,560
Period 4 / 4,640 / 2,400
Total / $ / 9,840 / $ / 9,840

The net present value of Investment II assuming an 9% minimum rate of return would be which of the following amounts? (Do not round your PV factors and intermediate calculations. Round your answer to the nearest whole dollar.)

$9,840
$7,821
$7,603
$2,021

10.

An investment that costs $32,000 will produce annual cash flows of $10,680 for a period of 4 years. Given a desired rate of return of 8%, the investment will generate a (Do not round your PV factors and intermediate calculations. Round your answer to the nearest whole dollar.):

negative net present value of $35,374.
negative net present value of $3,374.
positive net present value of $35,374.
positive net present value of $3,374.

11.

An investment that costs $26,500 will produce annual cash flows of $5,300 for a period of 6 years. Further, the investment has an expected salvage value of $3,150. Given a desired rate of return of 12%, the investment will generate a (Do not round your PV factors and intermediate calculations. Round your answer to the nearest whole dollar.):

negative net present value of $3,114.
negative net present value of $26,500.
positive net present value of $21,790.
negative net present value of $1,596.

12.

Tawanna is considering starting a small business. She plans to purchase equipment costing $143,000. Rent on the building used by the business will be $23,000 per year while other operating costs will total $28,800 per year. A market research specialist estimates that Tawanna's annual sales from the business will amount to $87,000. Tawanna plans to operate the business for 6 years. Disregarding the effects of taxes, what will be the amount of annual net cash flow generated by the business?

$35,200
$51,800
$87,000
None of these answers are correct.

13.

Britannia Company has two investment opportunities. A cash flow schedule for the investments is provided below:

Year / Investment A / Investment B
0 / ($5,900) / ($7,350)
1 / 2,360 / 3,540
2 / 2,360 / 2,360
3 / 2,360 / 2,360
4 / 2,360 / 1,180

Considering the unequal investments, which of the following techniques would be most appropriate for choosing between Investment A and Investment B?

Payback technique
Present value index
Net present value technique
None of these answers are correct.

14.

Mountain Brook Company is considering two investment opportunities whose cash flows are provided below:

Year / Investment A / Investment B
0 / ($16,750) / ($11,100)
1 / 5,630 / 5,630
2 / 5,630 / 4,560
3 / 5,630 / 3,770
4 / 4,560 / 1,840

The company's hurdle rate is 10%. What is the present value index of Investment B?(Do not round your PV factors and intermediate calculations. Round your answer to 2 decimal places.)

0.86
1.42
1.17
None of these answers are correct.

15.

An investment that costs $5,100 will produce annual cash flows of $2,060 for a period of 4 years. Given a desired rate of return of 12%, the investment will generate a present value index of (Do not round your PV factors and intermediate calculations. Round your answer to 3 decimal places.):

0.815.
1.227.
2.476.
4.408.

15.

0.815.
1.227.
2.476.
4.408.

17.

Synthesis Company is considering the purchase of a piece of equipment that costs $112,200. The equipment would be depreciated on a straight-line basis to its expected salvage value of $6,200 over its 10-year useful life. Assuming a tax rate of 40%, what is the annual amount of the depreciation tax shield provided by this investment?

9_03_2015_QC_CS-21366

$10,600

$6,360

$4,240

None of these answers are correct.

18.

Nielsen Company is considering the purchase of an asset that will provide a depreciation tax shield of $21,800 per year for 10 years. Assuming the company is subject to a 40% tax rate during the period, and a zero salvage value, what is the depreciable cost of the new asset?

$218,000
$363,333
$545,000
Can't be determined from the information provided

19.

Phoenix Company is considering purchasing a capital investment that is expected to provide annual cash inflows of $15,300 per year for 3 years. Assuming that Phoenix's required rate of return is 8%, what is the present value of these cash inflows? (Do not round your PV factors and intermediate calculations. Round your final answer to the nearest dollar.)

$39,352
$36,437
$42,500
$39,430

20.

Lane Company is considering purchasing a capital investment that is expected to provide annual cash inflows of $10,700 per year for 3 years. Assuming that the required rate of return is 7%, what is the present value of these cash inflows? (Do not round your PV factors and intermediate calculations. Round your final answer to the nearest dollar.)

$28,080
$30,000
$26,203
$28,037