2n Ognore income taxes in this problem)Chee Corporation has gathered the followi

Question

2n Ognore income taxes in this problem)Chee Corporation has gathered the following data on a proposed investment project: Investment required in equipment Annual cash inflows Salvage value Life of the investment Required rate of return $240,000 50,000 S0 8 years 10% The company uses straight-line depreciation. Assume cash flows occur uniformly throughout a year except for the initial investment The simple rate of return on the investment is closest to: A) 10.0% 12.5% C) 8.3% D) 20.8% 23) A product whose revenues do not cover the sum of its variable costs, its traceable fixed costs, and its allocated share of general corporate administrative expenses should usually be dropped. A) True B) False 2 When a multi-product factory operates at fall capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on: A) contribution margin per unit of the constraining resource B)unit sales volume C) contribution margin per unit D) selling price per unit The salvage value of new equipment should be considered when using the internal rate of return method to evaluate a project. A) True BFalse

Explanation / Answer

22. Answer : C 8.3%

annual Depreciation = $240,000 / 8 = $30,0000

Net annual income = $50,000 - $30,000 = $20,000

Simple rate of return = $20,000 / $240,000 = 8.33%

23. Answer : A True

24. Answer : A Contribution margin per unit of the constraining resource

25. Answer : A True

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