A company is considering a $240,000 investment in machinery with the following net cash flows. Thecompany requires a 9% return on its investments.Initial investmentRequired rate of returnRequired:$240,0009%(a) Compute the net present value of this investment.Present Value of NetPeriod1Net Cash FlowsCash Flows$53,000$48,6242049,00041,2423136,000105,017478,00055,257561,00039,646Totals$377,000$289,786(240,000)$49,786Initial investmentNet present valueVerify the value of cell C18 using the NPV function(b) Should the machinery be purchased?Yes

To compute the net value of the investment in machinery, the present value of each net cash flow…

Answered: A company is considering a $240,000…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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Assume a company is going to make an investment in a machine of $825,000 and the following are the cash flows that two different products would bring. Which of the two options would you choose based on the payback method?
Assume a company is going to make an investment of $450,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Which of the two options would you choose based on the payback method?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Foster Manufacturing is analyzing a capital investment project that is forecasted to produce the following cash flows and net income: Using the present value tables provided in Appendix A, the internal rate of return (rounded to the nearest whole percentage) is: a. 5%. b. 12%. c. 14%. d. 40%.
Optimal Cash Transfer Barenbaum Industries projects that cash outlays of 4.5 million will occur uniformly throughout the year. Barenbaum plans to meet its cash requirements by periodically selling marketable securities from its portfolio. The firms marketable securities are invested to earn 12%, and the cost per transaction of converting securities to cash is 27. a. Use the Baumol model to determine the optimal transaction size for transfers from marketable securities to cash. b. What will be Barenbaums average cash balance? c. How many transfers per year will be required? d. What will be Barenbaums total annual cost of maintaining cash balances? What would the total cost be if the company maintained an average cash balance of 50,000 or of 0 (it deposits funds daily to meet cash requirements)?
A company is considering a $150,000 investment in machinery with the following net cash flows. The company requires a 10% return on its investments. (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Year Year 1 $10,000 Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows (a) Compute the net present value of this investment. (b) Should the machinery be purchased? Complete this question by entering your answers in the tabs below. Totals Initial investment Net present value Year 2 $25,000 Year 3 $50,000 Required A Required B Compute the net present value of this investment. (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar) Net Cash Flows Year 4 $37,500 Present Value Present Value of Factor Net Cash Flows
A company is considering a $168,000 investment in machinery with the following net cash flows. The company requires a 10% return on its investments. (PV of $1, FV of $1, PVA of $1. and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net Cash Flow (a) Compute the net present value of this investment. (b) Should the machinery be purchased? Year Year 11 Year 2 Year 1 $10,000 Complete this question by entering your answers in the tabs below. Year 3 Year 4 Year 5 Totals Initial investment Net present value Required A Required B Compute the net present value of this investment. (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) Year 2 $29,000 Net Cash Flows $ 0 Present Value Factor Year 3 $55,000 Present Value of Net Cash Flows $ $ Required A Year, 4 $42,000 0 0 Year 5 $113,000 Required >
Morrisey Company has two investment opportunities. Both investments cost $6,900 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below: Investment I Investment II Period 1 $ 1,950 $ 1,950 Period 2 1,950 3,140 Period 3 2,950 4,330 Period 4 5,520 2,950 Total $12,370 $12,370 What is the net present value of Investment Il assuming an 12% minimum rate of return? (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round your intermediate calculations. Round your answer to the nearest whole dollar.) Multiple Choice $2,301 $9,201 $12,370 $(8,903)
A company is considering a $153,000 Investment in machinery with the following net cash flows. The company requires a 10% return on Its Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net Cash Flow (a) Compute the net present value of this Investment. (b) Should the machinery be purchased? Year 1 $9,000 Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 2 $26,000 Complete this question by entering your answers in the tabs below. Totals Initial investment Net present value Required A Required B Compute the net present value of this investment. (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) Net Cash Flows Year 3 $50,000 Year 4 $38,000 Present Value Present Value of Factor Net Cash Flows
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PAR Ltd is considering an investment and has determined the following: Expected net cash flows: – Year 1 $65,967 – Year 2 $70,290 – Year 3 $135,391 – Year 4 $103,435 – Year 5 $100,998 Annual depreciation $20,660 Period of investment 5 years Initial investment $611,246 Value at end of the investment period $124,671 Calculate the Accounting Rate of Return. Express your answer in a percentage with 2 decimal places.
McCann Company has identified an investment project with the following cash flows. a. If the discount rate is 11 percent, what is the present value of these cash flows? b. What is the present value at 18 percent? c. What is the present value at 29 percent?

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