# 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&#39;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&#39;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&#39;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&#39;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&#39;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&#39; 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.