ASAP Please! 1. The Corvette Corporation has a computer system that is in poor condition....
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Accounting
ASAP Please!
1. The Corvette Corporation has a computer system that is in poor condition. The system can be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives:
PresentSystem
ProposedNew System
Purchase cost when new
$100,000
$150,000
Accumulated depreciation
$90,000
-
Overhaul cost needed now
$80,000
-
Annual cash operating costs
$30,000
$20,000
Salvage value now
$10,000
-
Salvage value in 8 years
$2,000
$15,000
Working capital required
-
$50,000
The Corvette Corporation uses a 12% discount rate and the total cost approach to net present value analysis. Both alternatives are expected to have a useful life of eight years. The net present value of the alternative of overhauling the present system is closest to:
A. ($232,272)
B. ($108,000)
C. ($238,232)
D. ($228,232)
2. Malibu Systems is a division of a major corporation. Last year the division had total sales of $10,040,000, net operating income of $582,320, and average operating assets of $4,000,000. The company's minimum required rate of return is 14%. The division's return on investment (ROI) is closest to:
A. 14.6%
B. 36.6%
C. 4.1%
D. 0.9%
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