Acme Company is evaluating a project that requires an initial investment of $96,240 and is expected to generate annual net cash inflows of $20,000 per year for 6 years. The salvage value of the project is uncertain. Acme uses a discount rate of 8% to make capital budgeting decisions. What is the minimum amount of salvage value that would make this project acceptable?

Acme Company purchases new equipment that costs $160,000 and has a useful life of 10 years and a salvage value of $10,000. Acme sells the old equipment that is being replaced for $20,000. The payback period for the initial investment in the new equipment is 4 years. What is the simple rate of return on the investment in the new equipment? Round to one decimal place.

A project has a profitability index of 0.32 and the present value of the net cash inflows generated by the project is $18,000. What is the required initial investment for this project? Round to the nearest whole dollar amount and do not enter a dollar sign or a decimal point (e.g., enter 89, not $89.00).

Acme Company is evaluating a project that requires an initial investment of $225,000 and has a useful life of 6 years and a salvage value of $50,000. Acme uses a discount rate of 16% to make capital budgeting decisions. What is the minimum amount of annual net cash inflows that would make this project acceptable? Round to the nearest whole dollar amount.

Acme Company produces and sells three products—P, Q and R. Total annual customer demand is 3,000 units for Product P, 2,000 units for Product Q, and 2,400 units for Product R. The contribution margin per unit is $108 for Produce P, $119 for Product Q, and $95 for Product R. It takes 3.0 machine hours to produce one unit of Product P, 3.5 machine hours to produce one unit of Product Q, and 2.5 machine hours to produce one unit of Product R. Acme’s current capacity is 14,000 machine hours per year. What is the maximum amount that Acme should be willing to pay per machine hour to acquire an additional 1,000 machine hours of capacity?

Perch, ver B

Acme Company is evaluating a project that requires an initial investment of $95,610 and is expected to generate annual net cash inflows of $20,000 per year for 6 years. The salvage value of the project is uncertain. Acme uses a discount rate of 8% to make capital budgeting decisions. What is the minimum amount of salvage value that would make this project acceptable?

Acme Company plans to invest in a project that has a payback period of 6.5 years, an internal rate of return of 15%, and an estimated useful life of 8 years. After an internal review, management reduces the estimated salvage value of the project. How does this change affect the metrics for evaluating the capital investment? 

Acme Company purchases precious metal (Pd) at a cost of $42 per ounce. Acme can resell Pd as is for $45 per ounce or it can process it into gadgets. It takes one ounce of Pd to make one gadget, which Acme can sell for $75 per unit. In addition to the cost of Pd, Acme incurs $16 of additional variable costs to make and sell one gadget. The monthly traceable fixed costs related to producing and selling gadgets include $119,000 of salaries paid to managers, as well as $21,000 of depreciation expense on production equipment that has no resale value. How many gadgets does Acme need to sell each month to break-even on processing Pd into gadgets as opposed to merely reselling Pd as is?

Acme Company is considering an investment in labor-saving equipment that has an internal rate of return of 12%. The project has a 5-year useful life but no salvage value. Annual net cash inflows from the project are $100,000 per year in each of the 5 years. Acme uses a 14% discount rate to make capital budgeting decisions. What of the following statements is true?