Kaplan Gb519 Unit 4 GRADED Quiz

Unit 4 GRADED Quiz
Testbank Exercise
2
140.
Marilyn’s
parents have agreed to help her purchase a new car upon graduation in four
years. They have given her two choices. The first choice is that they will give
her $4,000 each year for the next four years for her to invest herself. The
second choice is that they will wait four years and give her $18,000. Marilyn
can invest the money at a 4% rate.

Required:

a.
Which
option should Marilyn choose? Why?

b.
If
Marilyn can invest the money at 8%, which options should she choose? Why?

Testbank Exercise
5
141.
General
Hospital is planning to add a new diagnostic machine which should improve its
quality of certain blood tests. The machine under consideration has a cost of
$79,189 and is expected to save the hospital $8,000 each year. The machine has
an expected useful life of 14 years.

Required:

a.
Calculate
the internal rate of return on the diagnostic machine.

b.
If the
hospital uses a hurdle rate of 6%, should the diagnostic machine be purchased?
Why or why not?

Testbank Exercise
6
142.
Birch
manufacturing is considering the addition of another product line to its
offerings. Equipment needed to produce the new line will cost $200,000. Birch
estimates that the net cash inflows from the new product line will be as
follows:

Years
1-10

$18,000
(each year)

Years
11-15

$5,000
(each year)

Year
16-20

$2,000

Required:

a.
What
is the payback period for the new product line?

b.
If the
company can establish a steady customer base before production starts and the
cash inflows will be $15,000 per year for years 1 – 15, what will be the
payback period?

Problem 8-29

Testbank Exercise
3
Rayburn
Industries is evaluating the investment of $140,000 in a new packing machine
that should provide annual cash operating inflows of $30,000 for 6 years. At
the end of 6 years, the packing machine will be sold for $5,000. Rayburn’s
required rate of return is 8%.
Required:
What is the machine’s net present value?
Based
on net present value, should Rayburn purchase the new packing machine? Why or
Why not?
List
two qualitative items that Rayburn should consider in the decision to purchase
the new machine.
Unit
9-3, LO3