Chapter 12
Strategic Investment Decisions
MULTIPLE-CHOICE QUESTIONS
12.16
12.17
12.18
12.19
12.20
Ans: D
Ans: B
Ans: C
Ans: A
Ans: B
EXERCISES
12.21
A. Using tables, the answer is ($8,000 x 0.5835) = $4,668.
Using Excel, the answer is $4,667.92.
B. Using the tables, the answer is ($125 x 1.7908) = $223.88.
Using Excel, the answer is $223.86.
C. Using tables, the answer is ($10,000 x 0.7473) = $7,473.
Using Excel, the answer is $7,472.58.
D. Using tables, the answer is ($1,000 x 0.5066) = $506.6
Using Excel, the answer is $506.63.
12.22 The proper sequence is: 4, 1, 5, 2, 3, and 6.
12.23 Payback = 2.88 months
12.24 NPV
= ($5,547)
12.25
A. NPV = $570.
B. IRR = 15.098%.
12.26
A.
B.
C.
D.
NPV = $6,080
IRR = 21.4%
ARR = 15%
Payback period = 4 years
12.27
A. NPV = $ (1,154.42)
B. ARR = 5%
C. Payback Period = 5.625 years
12.28
A. NPV = $4,465.
12-2 Cost Management
B. Present value selling price = $3,940.
C. The selling price of the equipment is $5,000
The future value = $6,125.
12.29
A. NPV = $116,988
B. IRR = 24.319%
C. Payback period is 2.73 years
D. ARR is 16.67%
12.31
A. NPV = $ 1,779
B. Profitability Index = 1.0297
C. Payback Period = 3.645 years
12.30
NPV as per Excel = $(429,480)
12.31
A. NPV = $1,779
B. Profitability index = 1.0297
C. Payback period = 3.654 years
12.32
B. NPV = $(27,900)
C. Q = 28,494 cases
12.33 Minimum annual savings required = $ 92,415
12.34
A. After-tax annual cash flow = $ 22,000
B. NPV = $35,817
C. Payback period = 2.73 years
12.35
A.
Project
IRR
1
15.67%
2
27.32%
3
26.59%
4
28.14%
The projects would be ranked 4, 2, 3, and 1.
12.36
A. Alternative 1 NPV $(173,724); Alternative 2 NPV $(165,233)
B. Alternative 1 NPV $(236,218); Alternative 2 NPV $(218,109)
Chapter 12: Strategic Investment Decisions 12-3
12.37
A. NPV = $ 141,440
B. IRR = 17.913%.
C. Payback Period = 3.13 years
PROBLEMS
12.39
A.
B.
C.
D.
E.
NPV = $ 2,358
Point of indifference X= $6,148.64 annual cost savings
Payback period = 6.85 years
AARR = 11%
Yes
12.41
A. NPV = $24,790
12.44
B. NPV = ($1,993)
C. Payback = 3.64 years
12.45
A. NPV = $ (8,374)
B. NPV = $ 3,617
12.46
A. NPV = $ (52)
12.47
B. The maximum salary = $1,461,825
12.48
A. NPV = $ (99,701)
B. Current ROI = 20%
New ROI = 17%
12-4 Cost Management
MINI-CASES
12.50
Based on the results found in the solution spreadsheet the following are the final answers:
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
The NPV would be ($ 22,900)
The NPV would be ($ 15,288)
The NPV would be ($ 31,323)
The minimum price that must be charged would be $5.79
The NPV would be $ 6,701
The NPV would be ($ 22,497)
The NPV would be ($ 21,596)
The NPV would be ($ 40,288)
The minimum price that must be charged would be $6.05
The minimum price that must be charged would be $6.16
The minimum price that must be charged would be $6.63
12.51
A. Weighted average cost of capital = 6.9130%