Present Value of $1
Present Value of an Annuity of $1

question 13

Multiple Choice

Present value of $1
Present value of an annuity of $1
$\begin{array}{|c|l|l|l|l|l|l|}\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\\hline 2 & 0.925 & 0.890 & 0.857 & 0.826 & 0.797 & 0.769 \\\hline 3 & 0.889 & 0.840 & 0.794 & 0.751 & 0.712 & 0.675 \\\hline 4 & 0.855 & 0.792 & 0.735 & 0.683 & 0.636 & 0.592 \\\hline 5 & 0.822 & 0.747 & 0.681 & 0.621 & 0.567 & 0.519 \\\hline 6 & 0.790 & 0.705 & 0.630 & 0.564 & 0.507 & 0.456 \\\hline 7 & 0.760 & 0.665 & 0.583 & 0.513 & 0.452 & 0.400 \\\hline 8 & 0.731 & 0.627 & 0.540 & 0.467 & 0.404 & 0.351 \\\hline 9 & 0.703 & 0.592 & 0.500 & 0.424 & 0.361 & 0.308 \\\hline 10 & 0.676 & 0.558 & 0.463 & 0.386 & 0.322 & 0.270 \\\hline\end{array}$ $\begin{array}{|c|l|l|l|l|l|l|}\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\\hline 2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \\\hline 3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\\hline 4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \\\hline 5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 3.433 \\\hline 6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \\\hline 7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\\hline 8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \\\hline 9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \\\hline 10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 \\\hline\end{array}$
-Refer to the Figure.Gibb Clinical Practice is considering an investment in new imaging equipment that will cost $400,000.The equipment is expected to yield cash inflows of $80,000 per year for a six-year period.At the end of the sixth year,the firm expects to recover $150,000 from the sale of the equipment.Gibb set a required rate of return at 10%.What is the net present value of the investment? (Note: there may be a rounding error depending on the table you use to compute your answer.Choose the answer closest to the result you calculate.)

• A)($177,280)
• B)($33,000)
• C)$33,000
• D)$45,200

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Definitions:

Variable Factory Overhead Controllable Variance

The difference between the actual variable overhead costs incurred and the standard variable overhead expenses expected, which can be controlled or influenced by management.

Standard Factory Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a certain base such as labor hours or machine hours.

Direct Labor Hour

A measure of the amount of time an employee spends producing goods or services, directly associated with the product's cost.

Normal Capacity

Represents the average production level expected over a specific period under normal operating conditions.