Reference no: EM132559141
Question 1: The management of Ro Corporation is investigating automating a process. Old equipment, with a current salvage value of $30,000, would be replaced by a new machine. The new machine would be purchased for $396,000 and would have a 6 year useful life and no salvage value. By automating the process, the company would save $137,000 per year in cash operating costs. The simple rate of return on the investment is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)
Multiple Choice
A. 19.4%
B. 17.9%
C. 34.6%
D. 16.7%
Question 2: Perkins Corporation is considering several investment proposals, as shown below:
Investment Proposal A B C D
Investment required $104,000 $130,000 $78,000 $97,500
Present value of future net cash flows $124,800 $195,000 $109,200 $192,000
If the project profitability index is used, the ranking of the projects from most to least profitable would be:
Multiple Choice
A. D, B, C, A
B. B, D, C, A
C. B, D, A, C
D. A, C, B, D