2. Determine Project Y's payback period Project Y Numerator: Initial investment $ Payback Period 1 Denominator: Annual net cash flow 321,000/ S 3. Compute Project Y's accounting rate of return 180,000 Accounting Rate of Return Payback Period 1.78 years

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
[The following information applies to the questions displayed belad
Project Y requires a $321,000 investment for new machinery wityy vifour-year life and no salvage value. The project
yield
owing annual results. Cash flows occur evenly withit veach year. (
Annual Asounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation-Machinery
Selling, general, and administrative expenses
Incone
2. Determine Project Y's payback period
Project Y
Project Y
Numerator:
Initial investment
$
3. Compute Project Y's accounting rate of return
Not present value
Payback Period
T
Denominator:
7 Annual net cash flow
Numerator
321,000 $
180,000
Accounting Rate of Return
Denominator
Net Cash Flows
Present Value
of Annuity at a
Project Y
$ 375,000
80,250
4. Determine Project Y's net present value using 7% as the discount rate. (Do not round intermediate calculations. Round your
present value factor to 4 decimals and final answers to the nearest whole dollar)
S
$ 99,750
Payback Period
1.78 years
Accounting Rate of Return
Present Value of Net
Transcribed Image Text:[The following information applies to the questions displayed belad Project Y requires a $321,000 investment for new machinery wityy vifour-year life and no salvage value. The project yield owing annual results. Cash flows occur evenly withit veach year. ( Annual Asounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Incone 2. Determine Project Y's payback period Project Y Project Y Numerator: Initial investment $ 3. Compute Project Y's accounting rate of return Not present value Payback Period T Denominator: 7 Annual net cash flow Numerator 321,000 $ 180,000 Accounting Rate of Return Denominator Net Cash Flows Present Value of Annuity at a Project Y $ 375,000 80,250 4. Determine Project Y's net present value using 7% as the discount rate. (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar) S $ 99,750 Payback Period 1.78 years Accounting Rate of Return Present Value of Net
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps with 8 images

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education