126) Which of the following is a weakness of the internal rate of return (IRR)? A) IRR assumes that.

126) Which of the following is a weakness of the internal rate of return (IRR)?

A) IRR assumes that the cash inflows from the project are immediately reinvested at the minimum required rate of return.

B) IRR ignores the time value of money.

C) IRR assumes that the cash inflows from the project are immediately reinvested at the internal rate of return.

D) IRR is not a percentage rate, but is expressed in dollars.

127) Another name for the minimum desired rate of return is

A) discount rate.

B) required rate of return.

C) hurdle rate.

D) All of the above

128) A company would consider all of the following in computing the IRR of an investment, except

A) predicted cash inflows over the life of the project.

B) the cost of the project.

C) depreciation expense on the assets of the project.

D) present value factors.

129) (Present value tables are required.) Mantua Motors is evaluating a capital investment opportunity. This project would require an initial investment of $38,000 to purchase equipment. The equipment will have a residual value at the end of its life of $3,000. The useful life of the equipment is 5 years. The new project is expected to generate additional net cash inflows of $12,000 per year for each of the five years. Mantua Motors' required rate of return is 14%. The net present value of this project is closest to

A) ($1,994).

B) $4,753.

C) $3,196.

D) $28,386.

130) (Present value tables are required.) Maersk Metal Stamping is analyzing a special investment project. The project will require the purchase of two machines for $30,000 and $8,000 (both machines are required). The total residual value at the end of the project is $1,500. The project will generate cash inflows of $11,000 per year over its 8-year life. If Maersk requires a 6% return, what is the net present value (NPV) of this project?

A) $30,310

B) $8,332

C) $2,456

D) $31,250.50

131) (Present value tables are required.) Figgey, a plastics processor, is considering the purchase of a high-speed extruder as one option. The new extruder would cost $52,000 and would have a residual value of $5,000 at the end of its 8 year life. The annual operating expenses of the new extruder would be $8,000. The other option that Figgey has is to rebuild its existing extruder. The rebuilding would require an investment of $30,000 and would extend the life of the existing extruder by 8 years. The existing extruder has annual operating costs of $11,000 per year and does not have a residual value. Figgey discount rate is 14%. Using net present value analysis, which option is the better option and by how much?

A) Better by $8,083 to rebuild existing extruder

B) Better by $8,083 to purchase new extruder

C) Better by $6,328 to rebuild existing extruder

D) Better by $6,328 to purchase new extruder

132) (Present value tables are required.) The Speedy-Delivery Company has two options for its delivery truck. The first option is to purchase a new truck for $15,000. The new truck will have a useful life of 5 years and a residual value of $2,000. Operating costs for the new truck will be $200. The second option is to overhaul its existing truck. The cost of the overhaul will be $8,000. The overhauled truck will have a useful life of 5 years and a residual value of $0. Operating costs for the overhauled truck will be $600. Using Speedy's discount rate of 5%, which option is better and by what amount?

A) Better to overhaul by $3,700

B) Better to purchase new by $3,700

C) Better to overhaul by $5,144

D) Better to purchase new by $5,144

133) (Present value tables are required.) Interior Products, Inc. is evaluating the purchase of a new machine to use in its manufacturing process. The new machine would cost $41,000 and have a useful life of 6 years. At the end of the machine's life, it would have a residual value of $2,500. Annual cost savings from the new machine would be $12,400 per year for each of the six years of its life. Interior Products, Inc. has a minimum required rate of return of 16% on all new projects. The net present value of the new machine would be closest to

A) $3,669.

B) $5,719.

C) $4,694.

D) $46,719.

134) (Present value tables are required.) Westin Manufacturing is considering the purchase of a new machine to use in its packing department. The new machine will have an initial cost of $170,000, a useful life of 12 years and a $10,000 residual value. Westin will realize $15,750 in annual savings for each of the machine's year useful life. Given Westin's 4% required rate of return, the new machine will have a net present value (NPV) of

A) ($28,436).

B) ($15,936).

C) ($154,064).

D) ($22,186).

135) (Present value tables are required.) Calby Enterprises is evaluating the purchase of a new computer network system. The new system would cost $25,000 and have a useful life of 6 years. At the end of the system's life, it would have a residual value of $3,000. Annual operating cost savings from the new system would be $8,800 per year for each of the six years of its life. Calby Enterprises has a minimum required rate of return of 12% on all new projects. The net present value of the new network system would be closest to