Question
5)Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $52,000. The annual cash inflows for the next three years will be:
YearCash Flow1 $26,000 2 24,000 3 19,000
Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the financial calculator method.
a.Determine the internal rate of return. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Internal rate of return %
b.With a cost of capital of 14 percent, should the equipment be purchased? YesNo
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Question
4)You buy a new piece of equipment for $27,729, and you receive a cash inflow of $4,400 per year for 14 years. Use Appendix D for an approximate answer but calculate your final answer using the financial calculator method.
What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Internal rate of return % rev: 02_11_2015_QC_CS-7555
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Question
3)X-treme Vitamin Company is considering two investments, both of which cost $30,000. The cash flows are as follows:
YearProject AProject B1$32,000 $21,000 2 15,000 14,000 3 6,000 11,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1.Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) Payback Period Project A year(s) Project B year(s) a-2.Which of the two projects should be chosen based on the payback method? Project AProject B b-1.Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent.(Do not round intermediate calculations and round your final answers to 2 decimal places.) Net Present Value Project A$ Project B$
b-2.Which of the two projects should be chosen based on the net present value method? Project AProject B
c.Should a firm normally have more confidence in the payback method or the net present value method? Net present value methodPayback method
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Question
16)Shack Homebuilders Limited is evaluating a new promotional campaign that could increase home sales. Possible outcomes and probabilities of the outcomes are shown next. Possible OutcomesAdditional
Sales in UnitsProbabilities Ineffective campaign 70 .40 Normal response 90 .30 Extremely effective 150 .30
Compute the coefficient of variation. (Do not round intermediate calculations. Round your answer to 3 decimal places.) Coefficient of variation
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