31 assume straight line amortization in all computations and ignore income taxes the 4309694
31) Assume straightline amortization in all computations, and ignore income taxes.
The internal rate of return in case Y is approximately
A) 10 percent.
B) 12 percent.
C) 14 percent.
D) 16 percent.
Below are two potential investment alternatives:
Case X 
Case Y 

Initial capital investment 
$120,000 
$180,000 
Estimated useful life 
3 yrs. 
3 yrs. 
Estimated terminal salvage value 
0 
0 
Estimated annual savings in cash operating costs 
$ 50,000 
$ 80,000 
Minimum desired rate of return 
10 percent 
12 percent 
Assume straightline amortization in all computations, and ignore income taxes.
32) The payback period in case X is
A) 3.0 years.
B) 0.4 years.
C) 2.5 years.
D) 2.4 years.
33) The payback period for case Y is
A) 0.44 years.
B) 3.00 years.
C) 2.25 years.
D) 2.40 years.
34) The accounting rate of return based on INITIAL investment in case X is
A) 41.67 percent.
B) 8.33 percent.
C) 16.67 percent.
D) 33.33 percent.
35) The accounting rate of return based on INITIAL investment in case Y is
A) 11.11 percent.
B) 44.44 percent.
C) 33.33 percent.
D) 22.22 percent.
Below are two potential investment alternatives:
Case A 
Case B 

Initial capital investment 
$90,000 
$150,000 
Estimated useful life 
3 yrs. 
3 yrs. 
Estimated terminal salvage value 
0 
0 
Estimated annual savings in cash operating costs 
$36,000 
$ 58,000 
Minimum desired rate of return 
10 percent 
12 percent 
Assume straightline amortization in all computations, and ignore income taxes.
36) The payback period in case A is
A) 0.4 years.
B) 2.5 years.
C) 3.3 years.
D) 3.0 years.
37) The payback period in case B is
A) 3.63 years.
B) 3.00 years.
C) 3.87 years.
D) 2.59 years.
38) The accounting rate of return based on INITIAL investment in case A is
A) 6.67 percent.
B) 5.56 percent.
C) 2.49 percent.
D) 40.00 percent.
39) The accounting rate of return based on INITIAL investment in case B is
A) 38.67 percent.
B) 2.59 percent.
C) 5.33 percent.
D) 2.40 percent.
40) In capital budgeting, the relevant tax rate to consider is the
A) prior year tax rate.
B) average rate expected for the company.
C) marginal rate expected for the company.
D) highest rate that applies to U.S. corporations.