An investment yielding fixed annual payments is called a(n): 

Mickey Mouse Company is considering two investment opportunities whose cash flows are provided below: Year Investment A Investment B 0 ($15,000) ($9,000) 1     5,000   5,000 2     5,000   4,000 3     5,000   3,000 4     4,000   1,000 The company’s hurdle rate is 12%.  What is the present value index of Investment A?  (Do not round your present value factors and intermediate calculations.)

This question is worth a total of 14 points. Happy Company is considering investing in the following two mutually exclusive projects:                                                                   Annual Cash Inflows             Year                            Project A                    Project B                1                               $  2,500                       $  4,000                2                                   2,500                           3,000                3                                   2,500                           2,000                4                                   2,500                           1,000             Total                           $10,000                       $10,000   Required: (NOTICE there are three (3) questions to this problem!) 1.  Which project is more desirable strictly in terms of cash inflows? Why? 2.  Compute the present value of each project’s cash inflows assuming the company’s required rate of return is 10%.  (Round your numbers to the nearest two decimal places (the nearest penny).)    SHOW COMPUTATIONS!   3.  Suppose each project costs $8,000. Compute the Net Present Value of each project.  Which project should be accepted, if only one can be selected?  Why?  (Show computations to explain your answer if necessary.)                                                                                          Project A                         Project B  

Gus Gus Company has two investment opportunities.  Both investments cost $5,000 and will provide the same total future cash inflows.  The cash receipt schedule for each investment is given below:          Investment I Investment II Period 1 $1,000 $3,000 Period 2   1,000   2,000 Period 3   2,000   2,000 Period 4   4,000   1,000 Total $8,000 $8,000  Select the correct statement:

Dopey is considering a capital project that costs $16,000.  The project will deliver the following cash flows:            Year 1 Year 2 Year 3 Year 4 Year 5 $8,000 $6,000 $5,000 $6,000 $5,000  Using the incremental approach, the payback period for the investment is:

Mental break time.  This is your last Accounting test here at CCC.  You deserve an easy question.  What is the Accounting Equation?

The review of a capital budgeting decision to determine whether a project was accepted that should have been rejected or whether a project was rejected that should have been accepted is referred to as:

What amount of cash must be invested today in order to have $30,000 at the end of one year assuming the rate of return is 9%? 

Which of the following would not be considered a cash inflow in determining the value of a capital investment? 

Jamison is involved in deciding whether to remain in the home he has lived in for the past ten years which is located very near his work or to move into a newer home that is located in the suburbs further from his job.  The old house was purchased for $140,000 and has a market value of $200,000.  The new home can be purchased for $275,000.  Choose the choice that contains information that is not relevant to Jamison’s decision?