Use the Following Information for Questions 112-115 $\text { The company requires a } 10 \% \text { rate of return on all new investments. }$

question 78

Multiple Choice

Use the following information for questions 112-115.
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: $\begin{array}{lrr}&\text { Project Soup }&\text { Project Nuts }\\ \text { Initial investment } & \$ 400,000 & \$ 600,000 \\\text { Annual net income } & 30,000 & 46,000 \\\text { Net annual cash inflow } & 110,000 & 146,000 \\\text { Estimated useful life } & 5 \text { years } & 6 \text { years } \\\text { Salvage value } & -0- & -0-\end{array}$

$\text { The company requires a } 10 \% \text { rate of return on all new investments. }$

$\text { Present Value of an Annuity of } 1$
$\begin{array}{lllll}\text { Periods } & 9 \% & 10 \% & 11 \%& 12 \%\\5 & 3.890 & 3.791 & 3.696 & 3.605 \\6 & 4.486 & 4.355 & 4.231 & 4.111\end{array}$
-The annual rate of return for Project Soup is

• A) 7.5%.
• B) 15.0%.
• C) 27.5%.
• D) 55%.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowing funds over a period of time, often expressed as an annual percentage of the principal.

Income Before Taxes and Interest

Net earnings of a company before accounting for interest and tax expenses, used to analyze operating performance without financing or tax influences.

Accounts Receivable Turnover

A financial ratio that measures how many times a company can turn its accounts receivable into cash within a specific period.

Account Receivables Balance

The total amount of money owed to a company by its customers for goods or services delivered on credit.