51 suppose whole foods is considering investing in warehouse management software tha 4307972

51 suppose whole foods is considering investing in warehouse management software tha 4307972

51) Suppose Whole Foods is considering investing in warehouse-management software that costs $600,000, has $60,000 residual value and should lead to cash cost savings of $130,000 per year for its five-year life. In calculating the ARR, which of the following figures should be used as the equation's denominator?

A) $60,000

B) $600,000

C) $130,000

D) $275,000

52) The Hanna Company uses straight-line depreciation and is considering a capital expenditure for which the following relevant cash flow data have been estimated:

Estimated useful life: 3 years

Initial investment:$500,000

Savings year 1:$210,000

Savings year 2:$150,000

Savings year 3:$225,000

Residual value after 3 yrs$50,000

Total net inflows during the useful life of the asset are

A) $635,000.

B) $535,000.

C) $585,000.

D) $85,000.

Total$225,000

53) The Hanna Company uses straight-line depreciation and is considering a capital expenditure of which the following relevant cash flow data have been estimated:

Estimated useful life: 3 years

Initial investment:$500,000

Savings year 1:$210,000

Savings year 2:$150,000

Savings year 3:$225,000

Residual value after 3 yrs$50,000

Total operating income from the asset over the 3-year period is

A) $85,000.

B) $150,000.

C) $435,000.

D) $135,000.

54) The Hanna Company uses straight-line depreciation and is considering a capital expenditure of which the following relevant cash flow data have been estimated:

Estimated useful life: 3 years

Initial investment:$500,000

Savings year 1:$210,000

Savings year 2:$150,000

Savings year 3:$225,000

Residual value after 3 yrs$50,000

The total depreciation expense over the life of the asset is

A) $150,000.

B) $550,000.

C) $450,000.

D) $585,000.

55) The Hanna Company uses straight-line depreciation and is considering a capital expenditure forwhich the following relevant cash flow data have been estimated:

Estimated useful life: 3 years

Initial investment:$500,000

Savings year 1:$210,000

Savings year 2:$150,000

Savings year 3:$225,000

Residual value after 3 yrs$50,000

The accounting rate of return is closest to

A) 39.00%.

B) 9.00%.

C) 30.00%.

D) 7.69%.

56) O'Mally Department Stores is considering two possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost of $1,920,000. Under the other proposal, the company would focus on Kentucky and open 6 stores at a cost of $2,500,000. The following information is available:

Indiana proposalKentucky proposal

Required investment$1,920,000$2,500,000

Estimated life10 years10 years

Estimated residual value$50,000$80,000

Estimated annual cash inflows over the next 10 years$400,000$500,000

Required rate of return10%10%

The payback period for the Kentucky proposal is closest to

A) 4.5 years.

B) 6.25 years.

C) 5.00 years.

D) 31.25 years.

57) O'Mally Department Stores is considering two possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost of $1,920,000. Under the other proposal, the company would focus on Kentucky and open 6 stores at a cost of $2,500,000. The following information is available:

Indiana proposalKentucky proposal

Required investment$1,920,000$2,500,000

Estimated life10 years10 years

Estimated residual value$50,000$80,000

Estimated annual cash inflows over the next 10 years$400,000$500,000

Required rate of return10%10%

The payback period for the Indiana proposal is closest to

A) 3.8 years.

B) 5.0 years.

C) 4.8 years.

D) 38.4 years.

58) O'Mally Department Stores is considering two possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost of $1,920,000. Under the other proposal, the company would focus on Kentucky and open 6 stores at a cost of $2,500,000. The following information is available:

Indiana proposalKentucky proposal

Required investment$1,920,000$2,500,000

Estimated life10 years10 years

Estimated residual value$50,000$80,000

Estimated annual cash inflows over the next 10 years$400,000$500,000

Required rate of return10%10%

The accounting rate of return for the Kentucky proposal is closest to

A) 10.32%.

B) 11.09%.

C) 10.00%.

D) 20.00%.

59) O'Mally Department Stores is considering two possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost of $1,920,000. Under the other proposal, the company would focus on Kentucky and open 6 stores at a cost of $2,500,000. The following information is available:

Indiana proposalKentucky proposal

Required investment$1,920,000$2,500,000

Estimated life10 years10 years

Estimated residual value$50,000$80,000

Estimated annual cash inflows over the next 10 years$400,000$500,000

Required rate of return10%10%

The accounting rate of return for the Indiana proposal is closest to

A) 10.32%.

B) 11.09%.

C) 20.83%.

D) 10.83%.

60) Runnin' Wild Family Fun Center bought new go-karts for its recreation facility. The useful life is 6 years. The go-karts had a total cost of $5,100 and will generate $1,700 total cash inflows each year for the life of the go-karts. The residual value of the go-karts is $650. The payback period in years is closest to

A) 3.38.

B) 3.00.

C) 2.62.

D) 2.17.

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