A company is considoring purchasing equipment costing $155,000. Tho equipment isaxpected to roduce costs from year 1 to 2 by $2,000, year 3 to 6 by $70,000, and in year 7 by$2,000. In year 7, the equipment can be sold at a 9 salvage value of $22,000,. Calculate theinternal rate of return (IRR) tor this proposal.

The first step in calculating the internal rate of return (IRR) is to identify the cash flows…

Answered: A company is considoring purchasing…

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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Alternative R has a first cost of $85,000, annual M&O costs of $60,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $55,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S that would yield a required incremental rate of return of 25.00% The M&O cost for alternative S is $
A new project has an initial cost of $250,000. The equipment will be depreciated on a straight-line basis to a zero book value over the five-year life of the project. The projected net income each year is $13,250, $18,000, $20,240, $15,150, and $11,900, respectively. What is the average accounting return? Multiple Choice 11.52% 8.95% 13.46% 12.57% 5.33%
Please show all your work
Coronado, Inc. is considering purchasing equipment costing $39000 with a 7-year useful life. The equipment will provide cost savings of $8700 and will be depreciated straight-line over its useful life with no salvage value. Coronado Inc. requires a 9% rate of return. What is the approximate internal rate of return for this investment? Period 7 10% O 11% 000 9% 8% 7% 5.389 8% Present Value of an Annuity of 1 5.206 9% 5.033 10% 4.868 11% 4.712 14% 4.288
Davis Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate net present value of this investment?
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $491,000 cost with an expected four-year life and a $20,000 salvage value. Additional annual information for this new product line follows. (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Required: 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 3. Compute net present value for this machine using a discount rate of 7%. $ 1,990,000 1,509,000 117,750 162,000 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute net present value…
Assume XYZ wishes to purchase a machine for $500k that will produce widgets which will sell for $50 each. Assume variable costs of $30/unit and other fixed costs will be $100k per year. Assume a tax rate of 25%, and assume that assets purchased will be in a CCA class with a rate of 20%. Assume further the assets purchased will have a salvage value of $20,000 after the 5 year life of the project, and that interest rates are 10%. a. Compute the after-tax contribution margin. b. Find the PV break-even volume.
A construction company must replace a piece of heavy earth-moving equipment. Cat and Volvo are the two best alternatives. Both alternatives are expected to last 8 years. If the company has a minimum attractive rate of return (MARR) of 11%, which alternative should be chosen? Use IRR analysis. Cat Volvo First cost $15,000 $22,500 Annual operating cost 3,000 1,500 Salvage value 2,000 4,000 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
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The management of Kunkel Company is considering the purchase of a $29,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 16%. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the net present value of the investment in the machine. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Use the appropriate table to determine the discount factor(s).) Net present value
A 5-year project is estimated to cost $700,000 and have no residual value. If the straight-line depreciation method is used and estimated total income is $231,000, determine the average rate of return giving effect to depreciation on the investment. Round your percentage answer to one decimal place (for example, a value of .1048 rounds to 10.5%).fill in the blank 1 %
Two altemnative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL depreciation, an income-tax rate of 25%, and an after-tax MARR of 10%. Capital investment Life Machine A $20,000 12 years $3,500 Calculate the AW value for the Machine A. AWA (10%) = $(Round to the nearest dollar.) Terminal BV (and MV) Annual receipts Annual expenses Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Machine B $34,000 9 years $2,000 $144,000 $142,000 $190,000 $163,000

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