Exam 7: Capital Budgeting Decisions

(Ignore income taxes in this problem. )An investment project has the following characteristics: The life of the equipment is closest to:

(Ignore income taxes in this problem. )The management of Kobler Corporation is investigating an investment in equipment that would have a useful life of 5 years.The company uses a discount rate of 10% in its capital budgeting.Good estimates are available for the initial investment and the annual cash operating outflows, but not for the annual cash inflows and the salvage value of the equipment.The net present value of the initial investment and the annual cash outflows is -$235, 421. Ignoring the cash inflows, to the nearest whole dollar how large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive?

Dul Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project in 3 years.The company's discount rate is 7%.The net present value of the project is closest to:

(Ignore income taxes in this problem. )Juliar Inc.has provided the following data concerning a proposed investment project: The company uses a discount rate of 12%. Required: Compute the net present value of the project.

(Ignore income taxes in this problem. )The management of Stanforth Corporation is investigating automating a process.Old equipment, with a current salvage value of $24, 000, would be replaced by a new machine.The new machine would be purchased for $516, 000 and would have a 6 year useful life and no salvage value.By automating the process, the company would save $173, 000 per year in cash operating costs.The simple rate of return on the investment is closest to:

(Ignore income taxes in this problem. )The management of Sobus Corporation is considering a project that would require an initial investment of $458, 000 and would last for 9 years.The annual net operating income from the project would be $58, 000, including depreciation of $48, 000.At the end of the project, the scrap value of the project's assets would be $26, 000. Required: Determine the payback period of the project.Show your work!

(Ignore income taxes in this problem. )Shiffler Corporation is contemplating purchasing equipment that would increase sales revenues by $246, 000 per year and cash operating expenses by $133, 000 per year.The equipment would cost $275, 000 and have a 5 year life with no salvage value.The annual depreciation would be $55, 000. Required: Determine the simple rate of return on the investment to the nearest tenth of a percent.Show your work!