10. Flynn Corporation is debating whether to purchase a new computerized production system. The system will cost $450,000, and have an estimated 10- year life with a salvage value of $70,000. The estimated operating results from the new production system are as follows: Incremental revenue. Incremental expenses: Expenses other than depreciation. Depreciation (straight-line basis) Incremental net income. $85,000 38,000 $180,000 (123,000) $57,000 All revenue and expenses other than depreciation will be received and paid in cash. Compute the following for this proposal: (rounded) (a) Annual net cash flow: $ (b) Payback period: (c) Return on average investment: (d) Net present value, discounted at an annual rate of 6% (present value of $1 due in 10 years, discounted at 6%, is 0.558: present value of $1 received annually for 10 years, discounted at 6%, is 7.360): $

10. Flynn Corporation is debating whether to purchase a new computerized production system. The system will cost $450,000, and have an estimated 10- year life with a salvage value of $70,000. The estimated operating results from the new production system are as follows: Incremental revenue. Incremental expenses: Expenses other than depreciation. Depreciation (straight-line basis) Incremental net income. $85,000 38,000 $180,000 (123,000) $57,000 All revenue and expenses other than depreciation will be received and paid in cash. Compute the following for this proposal: (rounded) (a) Annual net cash flow: $ (b) Payback period: (c) Return on average investment: (d) Net present value, discounted at an annual rate of 6% (present value of $1 due in 10 years, discounted at 6%, is 0.558: present value of $1 received annually for 10 years, discounted at 6%, is 7.360): $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. Batinah Water Desalination project is a 15 year project. The project manager estimated that net initial investment expend in year zero is 100 million rials. The investment will be depreciated on a straight line basis to a 10 million book value by enc the project. During the operating phase revenue per year is 35 million and expense per year is estimated to be 20 million ria per year for 15 years. In year 15 net salvage value is estimated to be 15 million. WACC is estimated to be 10%. Tax Rate 209 1. Calculațe annual depreciation expenses 2. Calculate cash flow after tax CFAT in year 5 3. Calculate net present value. 4. Is it a good project Only final answers are required
1. Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.82 million. The marketing department predicts that sales related to the project will be $2.52 million per year for the next four years, after which the firm expects to sell it for $500,000. The machine is a five-year class asset and will be depreciated down to zero over five years under the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. Howell also needs to add net working capital of $200,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 35 percent. The required rate of return (or discount rate) for the project is 12.5 percent. Compute the NPV, IRR, and payback period of the project. The firm’s acceptable payback period is 3 years. Is this project acceptable to the firm?
National Integrated Systems (NIS), a global provider of heating and air conditioning is planning a project whose data is provided below. The project’s equipment has a 3 year tax life after which its salvage value will be zero. The machinery will be depreciated on a straight line basis over three years. Revenues and other operating costs are expected to be constant over the project’s life. What is the project’s cash flow in Year 1? Equipment Cost = $130,000Depreciation rate = 33.33%Annual Sales Revenue= $120,000Operating Costs (ex Depreciation) = $50,000 Tax Rate = 35%
Subject: accounting
None
15. Hobie Corp. has the following information for the purchase of a new machine in its manufacturing process: Cost of the machine Expected useful life-the cost of the machine will be depreciated on a straight-line basis to a terminal disposal value of zero. Working capital investment upon machine purchase (fully recovered at the end of the useful life) Annual cost savings with the new machine Machine's expected salvage value at the end of four years Required rate of return Hobie's tax rate a. Calculate the net present value (NPV) of the project (round your solution to dollars). $ 225,000 4 years c. Should the project be accepted or rejected? Why? $12,000 $ 66,000 $8,000 8% 15% b. What is the payback period of the project (round your solution to two decimal places)?
am. 120.
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29. X Corporation is considering buying a $25,000 machine. Its estimated useful life is 5 years, with no salvage value. X anticipates annual net income after taxes of $1,500 from the new machine. What is the rate of return on average investment, assuming that X uses straight-line depreciation and that the net income is earned uniformly throughout each year? A. 6.0% B. 8.0% C. 12.0% D. 26.0% E. 52.0%
Consider a project with a life of 4 years with the following information: initial fixed asset investment = $370,000; straight - line depreciation to zero over the 4 - year life; zero salvage value; price = $26; variable costs = $18; fixed costs $177,600; quantity sold = 85,248 units; tax rate 25 percent. How sensitive is OCF to changes in quantity sold? Multiple Choice $6.84 $6.00 $4.26 $0.17 $7.74