accounting 421945

The following information pertains to questions 13 through 17

Buchanan enterprises is considering investing in a machine that costs $400,000. The machine expected to generate revenues of $175,000 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) $179,992

b) $(13,338)

c) $119,367

d) $ (1,966)

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