ACCOUNTING-Directions: Your assignment this week is to answer the four questions below

DeVry University

ACCT346 Weekly
Assignment

Week 7

Directions: Your assignment this week is to answer the four
questions below. Please note that Question #1 has 2 parts, Part A and Part B.
Please show your work for full credit and use the box provided. Please add more rows or columns to
the box if needed.

1. Gomez Corporation is considering two
alternative investment proposals with the following data:

Proposal X
Proposal Y

Investment
$850,000
$468,000

Useful
life
8 years
8 years

Estimated
annual net
$125,000
$78,000

cash
inflows for 8 years

Residual
value
$40,000
$ –

Depreciation
method
Straight-line
Straight-line

Required
rate of return
14%
10%

1a.
How long is the payback period for Proposal X?

1b.
What is the accounting rate of return for Proposal Y?

2. You have been awarded
a scholarship that will pay you $500 per semester at the end of each of the
next 8 semesters that you earn a GPA of 3.5 or better. You are a very serious
student and you anticipate receiving the scholarship every semester. Using a
discount rate of 3% per semester, which of the following is the correct
calculation for determining the present value of the scholarship? PLEASE
STATE WHY YOU CHOSE THE ANSWER THAT YOU DID.

A) PV = $500 × 3% × 8

B) PV = $500 × (Annuity
PV factor, i= 3%,n = 8)

C) PV = $500 × (Annuity
FV factor, i= 6%,n = 4)

D) PV = $1,000 × (PV
factor, i = 3%,n = 4)

3. Maersk Metal Stamping
is analyzing a special investment project. The project will require the
purchase of two machines for $30,000 and $8,000 (both machines are required).
The total residual value at the end of the project is $1,500. The project
will generate cash inflows of $11,000 per year over its 8-year life.

If Maersk requires a 6%
return, what is the net present value (NPV) of this project? (Use present
value tables or Excel.)

4. Hincapie Manufacturing
is evaluating investing in a new metal stamping machine costing $30,924.
Hincapie estimates that it will realize $12,000 in annual cash inflows for
each year of the machine’s 3-year useful life.

Approximately, what is the the internal rate of return (IRR) for
the machine? (Use present value tables or Excel.)