Smitty Corp, whose required rate of return is 10%, is considering the purchase of a new piece of equipment. The internal rate of return of the project, which has a life of 8 years, is 12%. The project would have A.an accounting rate of return greater than 10%. B.a payback period more than 8 years. C.a net present value of zero. D.a net present value greater than zero. 2. How much would you need to deposit now in a savings account that earns 5% interest, compounded annually, in order to withdraw $5,000 at the end of every year for ten years? A.$47,619 B.$47,500 C.$38,609 D.$50,000 3. Summit Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $159,600. The equipment will have an initial cost of $532,000 and have a 7 year life. If the salvage value of the equipment is estimated to be $14,000, what is the accounting rate of return? A.30.00% B.47.11% C.152.37% D.19.28% 4.Hiawatha Corp is considering the purchase of a new piece of equipment.
The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and have a 6 year life. There is no salvage value for the equipment. If the hurdle rate is 8%, what is the approximate net present value? Ignore income taxes. A.$924,580 B.$300,000 C.$24,580 D.$900,000 5. Albertville Inc produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor and 2.2 hours of skilled labor. How much will be paid to skilled labor during the three months July - September?