1. Isomer Industrial Training Corporation is considering the purchase of new pre
ID: 2428488 • Letter: 1
Question
1. Isomer Industrial Training Corporation is considering the purchase of new presentation equipment at a cost of $150,000. The equipment has an estimated useful life of 10 years with an expected salvage value of zero. The equipment is expected to generate net cash inflows of $35,000 per year in each of the 10 years. Isomer's discount rate is 16%. Isomer uses the straight-line method of depreciation for its assets.What is the payback period of the presentation equipment?
A. 2.3 years
B. 3.0 years
C. 4.3 years
D. 5.8 years
2. Leonhardt Corporation's net income last year was $3,800,000. The dividend on common stock was $2.00 per share and the dividend on preferred stock was $1.80 per share. The market price of common stock at the end of the year was $53.40 per share. Throughout the year, 500,000 shares of common stock and 100,000 shares of preferred stock were outstanding. The price-earnings ratio is closest to:
A. 9.54
B. 7.03
C. 7.38
D. 10.19
Explanation / Answer
Year
cash flow
1
35000
2
35000
3
35000
4
35000
5
35000
6
35000
7
35000
8
35000
9
35000
10
35000
Year
cash flow
1
35000
2
35000
3
35000
4
35000
5
35000
6
35000
7
35000
8
35000
9
35000
10
35000
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