A company is considering an investment proposal to install new milling machine. The project will cost Rs.50,000. The facility has a life expectancy of 5 years and no salvage value. The company tax rate is 40%. Firm uses straight-line method for depreciation. The estimated earnings before tax from the proposed investment plan are as under. Year Earning before tax Rs. 22,000 18,000 14,000 15,000 25,000 Compute cash flow for 5 years. Calculate: Payback period Profitability Index IRR

Q: The Wet Corporation has an investment project that will reduce expenses by $30,000 per year for 3…

A: Depreciation year 1= Depreciation rate * Project cost= 0.3333 * 35,000= 11665.50

Q: a project will increase sales by $92,800 and cash expenses by $53,200. The project will cost $89,000…

A: Operating cash flow is an important concept. It considers depreciation as a provision to get tax…

Q: Multiple Choice

A: $265,600 Explanation: Non-cash expenditures like depreciation and amortization are excluded from…

Q: Addison Corp. is considering the purchase of a new piece of equipment. The equipment will have an…

A: Cash flows are the cash generated from the operation of the business organisation. In other words,…

Q: ears. The company's required rate of return is 10% and pays tax at a 35% rate. The projects with be…

A: Given information : Year Cash flows A  Cash flows B 0 -20000 -20000 1 4000 6600 2 4000 8300…

Q: Godzilla Company is evaluating a new 5-year project that will have annual sales of $450,000 and…

A: Operating cash flow is that amount of profit which is earned by the investor from the project. It is…

Q: Luki-Liku Co. purchases an asset for $100,000 with an estimated life of 5 years and a salvage value…

A: Luki-Liku Co. purchases an asset for $100,000 with an estimated life of 5 years and a salvage value…

Q: The Fleming Manufacturing Company is considering a new investment. Financial projections for the…

A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…

Q: Sammy Corporation is considering two alternative investment proposals with the following data:…

A: The IRR of a project refers to the maximum return for which the project remains profitable. It is…

Q: Gillespie Gold Products, Inc., is considering the purchase of new smelting equipment. The new…

A: ATCF is after tax cash flow is the measurement o0f the performance of the company, that shows the…

Q: A company buys a machine for $80,000 that has an expected life of 10 years and no salvage value. The…

A: Formula: Accounting rate of return = Net Income after tax / Average investment. Division of average…

Q: corporation want to estimate the terminal cash flow. The proposed machine will be disposed of at the…

A: Terminal cash flow is cash flow you received at end of projects after disposal of equipment.So this…

Q: Total cash inflows $325,000 Measure the Payback Period for this in

A: The payback period is the amount of time it takes to repay the cost of an investment.Simply said,…

Q: Joetz Corporation has gathered the following data on a proposed investment project (Ignore income…

A: Annual Depreciation  = (Cost of Asset-Salvage Value)/Useful life of Asset…

Q: The Fleming Manufacturing Company is considering a new investment. Financial projections for the…

A: The net income is calculated by

Q: a company can buy a machine that is expected to have a three-year life and a 30,000 salvage value.…

A: Net Present Value: It is the present worth today of the project having the initial cost and annual…

Q: Joetz Corporation has gathered the following data on a proposed investment project (Ignore income…

A: Depreciation represents the reduction in the value of an asset over the useful life. It is an…

Q: Blue Company, is trying to assess the feasibility of acquiring an accounting system for $10,000,000.…

A: Accounting system cost = $10,000,000 Saving = $2,000,000 Time Period = 5 Years Cost of capital = 15%…

Q: Tucker Manufacturing is considering investing in specialized equipment costing $841,000. The…

A: Net cash inflow and average net income are two different financial metrics used in capital budgeting…

Q: Blue Company, is trying to assess the feasibility of acquiring an accounting system for $10,000,000.…

A: Book rate of return is calculated to identify potential profitability of the project in which an…

Q: Required For each project calculate: (i) Pay-back Period (ii) Internal Rate of Return…

A: Payback period, Internal Rate of Return (IRR), and Profitability Index (PI) are financial metrics…

Q: Daily Enterprises is purchasing a $14,000,000 machine. The machine will depreciated using…

A: The objective of the question is to calculate the annual cash flow for Daily Enterprises from the…

Q: ACDC Company is considering the installation of a new machine that costs $150,000. The machine is…

A: The internal rate of return is the rate of return a project generates in its lifetime expressed in a…

Q: Joetz Corporation has gathered the following data on a proposed investment project (Ignore income…

A: The Net present value of the project would be providing the absolute figure of how much profit we…

Q: pany has purchased a machine at the cost of $35,000. The machine is expected to provide annual…

A: NPV is net present value and is most used capital budgeting method being used and based on the time…

Q: The Lumber Yard is considering adding a new product line that is expected to increase annual sales…

A: Depreciation is the decrease in the value of fixed assets. The cost of the fixed assets is allocated…

Q: Avalon Inc. is considering a new investment. The initial cost of the machinery is $184,000. Avalon…

A: Initial cost = $184,000 Useful life = 5 Year Salvage Value = $10,000 Annual depreciation expense =…

Q: Joetz Corporation has gathered the following data on a proposed investment project (Ignore income…

A: Internal rate of return refers to the rate of return that is being earned by the investors over the…

Q: Sad Company is considering the purchase of a new machine that would cost $80,000. The machine would…

A: Capital Budgeting:Businesses use capital budgeting as a process to assess significant prospective…

Q: Compute the payback period and the Net Present Value at 10% discount rate, profit after tax for each…

A: Capital budgeting is similar to making long-term financial decisions. It all comes down to deciding…

Q: The Wet Corporation has an investment project that will reduce expenses by $20,000 per year for 3…

A: Depreciation year 1= Depreciation rate * Project cost= 0.3333 * 25000= 8332.50

Q: educe its salary cash expense by $2,000,000 per year. The system has a five-year life, it will be…

A: Net Present Value: It is a measure of profitability in absolute dollar terms and is estimated by…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.