Question

1. The expected average rate of return for a proposed investment of $765,000 in a fixed asset, with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $303,000 for the four years, is (round to two decimal points).

2.Hayden Company is considering the acquisition of a machine that costs $462,000. The machine is expected to have a useful life of six years, a negligible residual value, an annual net cash flow of $97,000, and annual operating income of $82,450. What is the estimated cash payback period for the machine (round to one decimal points)?

3.The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine the best average rate of return. Which machine has the best average rate of return?

	Machine A	Machine B	Machine C
Estimated average annual income	$48,521.06	$83,178.60	$64,923.00
Average investment	$346,579.00	$277,262.00	$432,820.00

4.Heidi Company is considering the acquisition of a machine that costs $788,400. The machine is expected to have a useful life of six years, a negligible residual value, an annual net cash flow of $131,400, and annual operating income of $73,000. What is the estimated cash payback period for the machine (round to one decimal point)?

5.The amount of the average investment for a proposed investment of $209,000 in a fixed asset with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $34,400 for the four years is

6.The amount of the estimated average income for a proposed investment of $68,000 in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of four years, no residual value, and an expected total income yield of $25,100, is

7.Use these present value tables to answer the question that follow.

Below is a table for the present value of $1 at Compound interest.

Year	6%	10%	12%
1	0.943	0.909	0.893
2	0.890	0.826	0.797
3	0.840	0.751	0.712
4	0.792	0.683	0.636
5	0.747	0.621	0.567

Below is a table for the present value of an annuity of $1 at compound interest.

Year	6%	10%	12%
1	0.943	0.909	0.893
2	1.833	1.736	1.690
3	2.673	2.487	2.402
4	3.465	3.170	3.037
5	4.212	3.791	3.605

Using the tables above, what is the present value of $19,869.00 (rounded to the nearest dollar) to be received at the end of each of the next four years, assuming an earnings rate of 12%?

8. The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for five years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment:

Year	Income from Operations		Net Cash Flow
1	$18,750		$93,750
2	18,750		93,750
3	18,750		93,750
4	18,750		93,750
5	18,750		93,750

The net present value for this investment is

9. The expected average rate of return for a proposed investment of $4,200,000 in a fixed asset, using straight-line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $12,600,000 over the 20 years is (round to two decimal points).

Answer 1

Answer 1.
Average Net Income = $303,000 / 4 Years = $75,750
Average Rate of Return = Average Profits / Intial Investment
Average Rate of Return = $75,750 / $765,000
Average Rate of Return = 9.90% (Approx.)
Answer 2.
Cash Payback Period = $462,000 (Intial Investments) / $97,000 (Annual Net Cash Inflow)
Cash Payback Period = 4.76 Years (Approx.)
Answer 3.
	Machine A	Machine B	Machine C
Estimated Avearge Annual Income	48,521.06	83,178.60	64,923.00
Average Investments	346,579.00	277,262.00	432,820.00
Average Rate of Return	14.00%	30.00%	15.00%
Average Rate of Return = Average Profits / Intial Investment
Machine B - Best Average rate of Return
Answer 4.
Cash Payback Period = $788,400 (Intial Investments) / $131,400 (Annual Net Cash Inflow)
Cash Payback Period = 6 Years (Approx.)