| 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.) |
JaymieH
acct346_week_7_assignment.xlsx
