90.2K

Verified Solution

Link Copied!

1. The anticipated purchase of a fixed asset for $700,000, with a useful life of 10 years and no residual value, is expected to yield total net income of $100,000 for the 10 years. What is the expected average rate of return on investment? 2. If a proposed expenditure of $96,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, what is the cash payback period? 3. Can the cash payback method only be used when the net cash inflows are the same for each period? YES/NO 4. What are the two methods that ignore present value in capital investment analysis? 5. An entity is purchasing a machine that will cost $36,000, have a 6 -year life, and have no salvage value. The company expects to sell the machine's output of 4,000 units evenly throughout each year. Total income over the life of the machine is estimated to be $12,000. The machine will generate net cash flows per year of $6,000. What is the average rate of return for the machine? 6. When using the net present value to evaluate competing capital investment proposals, an excess of the present value of future cash inflows over the amount invested indicates that the rate of return on the proposal is less than the rate used in the analysis. TRUE/FALSE

Answer & Explanation Solved by verified expert

See Answer