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3). A company is considering the purchase of a machine for $150,000. It is expected useful life of five years. The plant manager estimates the following savings in cash operating costs:              Year                      Cash Savings                                  $10,000                                    20,000                                    30,000                                    40,000                                    50,000                        Total:             $150,000 The company uses a required rate of return of 10% in its capital budgeting decisions.           Calculate the followings: Net present value Payback period Accounting Rate of return.          Note: 10% discount factor Table A-3 Year PV of 10% Discount Factor 1 0.9091 2 0.8264 3 0.7513 4 0.6830 5 0.6209

3). A company is considering the purchase of a machine for $150,000. It is expected useful life of five years. The plant manager estimates the following savings in cash operating costs:              Year                      Cash Savings                                  $10,000                                    20,000                                    30,000                                    40,000                                    50,000                        Total:             $150,000 The company uses a required rate of return of 10% in its capital budgeting decisions.           Calculate the followings: Net present value Payback period Accounting Rate of return.          Note: 10% discount factor Table A-3 Year PV of 10% Discount Factor 1 0.9091 2 0.8264 3 0.7513 4 0.6830 5 0.6209

FINANCIAL ACCOUNTING
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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3). A company is considering the purchase of a machine for $150,000. It is expected useful life of five years. The plant manager estimates the following savings in cash operating costs:

 

           Year                      Cash Savings

  1.                                  $10,000
  2.                                    20,000
  3.                                    30,000
  4.                                    40,000
  5.                                    50,000

                       Total:             $150,000

The company uses a required rate of return of 10% in its capital budgeting decisions.

          Calculate the followings:

  1. Net present value
  2. Payback period
  3. Accounting Rate of return.

 

       Note: 10% discount factor Table A-3

Year

PV of 10% Discount Factor

1

0.9091

2

0.8264

3

0.7513

4

0.6830

5

0.6209

 

 

 

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