Carr Company Is Considering Two Capital Investment Proposals $\text { The company requires a } 10 \% \text { rate of return on all new investments. }$

question 40

Multiple Choice

Carr Company is considering two capital investment proposals.Estimates regarding each project are provided below: $\begin{array}{ccc}&\text { Project Soup }& \text { Project Nuts }\\\text { Initial investment } & \$ 270,000 & \$ 600,000 \\\text { Annual net income } & 27,000 & 45,000 \\\text { Net annual cash inflow } & 90,000 & 142,000 \\\text { Estimated useful life } & 5 \text { years } & 6 \text { years } \\\text { Salvage value } & -0- & -0-\end{array}$
$\text { The company requires a } 10 \% \text { rate of return on all new investments. }$
$\begin{array}{lllll}\begin{array}{c}\quad\quad\quad\underline{\text { Present Value of an Annuity of } 1}\\\end{array}\\\begin{array}{c}\underline{\text { Periods} } & \underline{9 \%} & \underline{10 \%} & \underline{11 \%} &\underline{ 12 \%}\\5 & 3.890 & 3.791 & 3.696 & 3.605 \\6 & 4486 & 4.355 & 4231 & 4111\end{array} \end{array}$ The net present value for Project Nuts is

• A)$618,410.
• B)$182,912.
• C)$100,000.
• D)$18,410.

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Definitions:

Trade Imbalance

A situation where a country's imports exceed its exports or vice versa, affecting the national economy's balance of payments.

Pork

The culinary name for meat derived from domestic pigs.

Imported

Pertains to goods or services brought into one country from another for the purpose of sale.

Global Competition

Exists when firms originate, produce, and market their products and services worldwide.