Below are two potential investment alternatives:

 Case X Case Y Initial capital investment \$120,000 \$180,000 Estimated useful life 3 yrs. 3 yrs. Estimated terminal salvage value -0- -0- Estimated annual savings in cash operating costs \$ 50,000 \$ 80,000 Minimum desired rate of return 10 percent 12 percent
 PV of \$1 (3 years) PV of an Annuity of \$1 (3 years) 8 percent 0.7938 2.5771 10 percent 0.7513 2.4869 12 percent 0.7118 2.4018 14 percent 0.6750 2.3216 16 percent 0.6407 2.2459

11) Assume straight-line amortization in all computations, and ignore income taxes.

The net present value in case X is

A) \$4,345.

B) \$82,435.

C) \$50,000.

D) \$90.

12) Assume straight-line amortization in all computations, and ignore income taxes.

The net present value in case Y is

A) \$80,000.

B) \$12,144.

C) \$(328).

D) \$123,056.

Below are two potential investment alternatives:

 Case X Case Y Initial capital investment \$90,000 \$150,000 Estimated useful life 3 yrs. 3 yrs. Estimated terminal salvage value -0- -0- Estimated annual savings in cash operating costs \$ 36,000 \$ 58,000 Minimum desired rate of return 10 percent 12 percent
 PV of \$1 (3 years) PV of an Annuity of \$1 (3 years) 8 percent 0.7938 2.5771 10 percent 0.7513 2.4869 12 percent 0.7118 2.4018 14 percent 0.6750 2.3216 16 percent 0.6407 2.2459

13) Assume straight-line amortization in all computations, and ignore income taxes.

The net present value in case A is

A) \$54,000.

B) \$(  472).

C) \$ 6,000.

D) \$(6,000).

14) Assume straight-line amortization in all computations, and ignore income taxes.

The net present value in case B is

A) \$8,000.

B) \$(8,000).

C) \$(10,696).

D) \$(8,716).

Alpha Company has the following information:

 Number of Years 5 10 15 Amount of annual cash inflow \$6,000 (c) \$ 3,050 Required initial investment (a) \$75,000 \$24,000 Internal rate of return 8 percent 10 percent (e) Minimum desired rate of return 10 percent (d) 8 Percent Net present value (b) \$ 3,900 (f)

15) What is (a)?

A) \$23,958

B) \$22,746

C) \$ 8,811

D) \$ 9,662

16) What is (b)?

A) \$ -0-

B) \$(1,212)

C) \$16,359

D) \$14,296

17) What is (c)?

A) \$28,950

B) \$71,100

C) \$12,205

D) \$ 3,900

18) What is (d)?

A) Less than 6 percent

B) Between 6 and 8 percent

C) Between 8 and 10 percent

D) Between 10 and 12 percent

19) What is (e)?

A) Below 6 percent

B) Between 6 and 8 percent

C) Between 8 and 10 percent

D) Between 10 and 12 percent

20) What is (f)?

A) \$2,105

B) \$26,105

C) \$3,050

D) \$(4,510)