The following information pertains to questions 13 through 17
Buchanan enterprises is considering investing in a machine that costs $400000. The machine expected to generate revenues of $175000 per year
for five years. The machine would be depreciated using the straight line method over its five year life and have no salvage value company has a 40 percent
income tax rate and desires a rate of return of 10 percent on its capital investments.
13) The internal rate of return of the machine is:
a) Greater than 20%
b) Between 18% and 20%
c) Between 16% and 18%
d) Less than 16%
14. The accounting rate of return of the machine is (round your answer to two decimal places)
a) 11.25%
b) 12.25%
c) 13.25%
d) 14.25%
15. The pay period of the machine is(round your answer to 2 decimal places)
a) 2.82 yrs
b) 2.92 yrs
c) 3.02 yrs
d) 3.12 yrs
16. The net present value of the machine is
a) $179992
b) $(13338)
c) $119367
d) $ (1966)
17) The profitability index of the machine is(round your answer to two decimal places)
a) 1.10
b) 1.20
c) 1.30
d) 1.40