A project that cost $72000 has a useful life of 5 years and a salvage value of $3000. The internal rate of return is 12% and the annual rate of return is 18%. The annual net income is A project that cost $72000 has a useful life of 5 years and a salvage value of $3000. The internal rate of return is 12% and the annualrate of return is 18%. The annual net income is$6750.Ⓒ$6210.O $4500.O $4140.

Average investment = (Initial investment + Salvage value)/2 Annual net income= (Average investment X…

Answered: A project that cost $72000 has a useful…

Business

Accounting

A project that cost $72000 has a useful life of 5 years and a salvage value of $3000. The internal rate of return is 12

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: What is annual worth of the project?

A: Annual Worth Analysis is a method which converts all cash flows to annual value of MARR. This is…

Q: Consider the financial data for a project given in the table below. Initial investment $70,000…

A: Internal Rate of Return is the rate at which the Net Present Value of a project becomes zero. It can…

Q: A project with a life of 11 has an initial fixed asset investment of $10,920, an initial NWC…

A: equivalent annual cost refers to the cost that is incurred for the purpose of owning, maintaining,…

Q: An 8-year project is estimated to cost $528,000 and have no residual value. If the straight-line…

A: Average annual income represents the yearly earnings generated from an investment or project,…

Q: Consider a capital expenditure project that has forecasted revenues equal to $32,000 per year; cash…

A: The company may use discounted cash flow approach to evaluate a project that is beneficial to accept…

Q: ing the current year, erchandise is sold for $900,000. The cost of the goods sold is $522,000. What…

A: Gross profit is very important for companies because it shows profit earned by company during the…

Q: the average rate of return for a project that is estimated to yield total income of $401,760 over 4…

A: The quantity of cash flow created on average annually throughout the course of an investment is…

Q: What is the accounting rate of return on the original cost of investment (ARROC)?

A: Answer: c. 9.6% Average cost of Investment = Original Cost of Investments / 2 326000 = Original…

Q: A potential investment has a cost of $395,000 and a useful life of 6 years. Annual cash sales from…

A: Decisions made regarding the capital budget have the potential to affect the financial performance…

Q: determine the average annual income.

A: The average rate of Return: The average rate of return is the percentage of average return incurred…

Q: One of two methods must be used to produce expansion anchors. Method A costs $75,000 initially and…

A: Present worth, also known as present value, is a financial concept used to determine the current…

Q: A new machine requires an investment of $630,000 and will generate $100,000 in cash inflows for 7…

A: The Net Present value iscalculated with the help of following formula Net Present Value = Present…

Q: A project with a life of 11 has an initial fixed asset investment of $42,000, an initial NWC…

A: By turning an asset's expenses and benefits into an equal yearly amount, equal Annual Cost (EAC) is…

Q: An 8-year project is estimated to cost $336,000 and have no residual value. If the straight-line…

A: Average rate of return = Average annual income / Average investment where, Average annual income =…

Q: An 8-year project is estimated to cost $528,000 and have no residual value. If the straight-line…

Q: A project is expected to generate annual revenues of $114,500, with variable costs of $73,600, and…

A: Operating Cash Flow:Operating cash flow refers to the amount of cash generated by a company's core…

Q: An 8-year project is estimated to cost $528,000 and have no residual value. If the straight-line…

A: Average Rate of Return: Average rate of return is a method that measures the average earnings of a…

Q: A project with the following costs are under consideration to determine its profitability. Using the…

A: Project Cash Flows:Year 0: Initial Cost = -$45,000Year 0.5 to Year 7.5 (8 semiannual…

Q: A project produces annual net income of $15,250, $18,700, and $21,750 over three years,…

A: The average accounting rate of return is calculated as ratio of average income over life of project…

Q: A 5-yr project has an initial requirement of $100,415 for new equipment and $8,944 for net working…

A: Calculation of Net Present Value:The net present value is $185,513.41.Excel Spreadsheet:

Q: A project has an initial cost of $34051 and a three-year life. The company uses straight-line…

A: The average accounting return (AAR) is calculated as the average annual net income divided by the…

Q: The cost of the project is $100,000. You expect the project to make $500,000 in 7years (CF of year 7…

A: The IRR for this project is C) 22.01%Explanation:To find the Internal Rate of Return (IRR) for the…

Q: A project is expected to generate annual revenues of $125, 700, with variable costs of $ 77,800, and…

A: Annual operating cash flows =( Annual revenues - variable cost - fixed cost ) (1-Tax rate)+…

Q: Determine the average rate of return for a project that is estimated to yield total income of…

A: Average rate of return = Average annual income / Initial investment where, Average annual income =…

Q: Lewis Enterprises is considering a project with an internal rate of return of 12%, an annual rate of…

A: Average investment = (Initial investment + Salvage value)/2 Annual rate of return = Annual net…

Concept explainers

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.

Question

100%

A project that cost $72000 has a useful life of 5 years and a salvage value of $3000. The internal rate of return is 12% and the annual rate of return is 18%. The annual net income is

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction :

VIEW

Step 2: Annual Net Income :

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

The table given below lists the relevant cost items for a specific system purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The salvage value for depreciation purposes is equal to 25% of the hardware cost. Cost Item Cost Hardware $160,000 Training $15,000 Installation $15,000 a) What is the Book Value (BV) of the device at the end of year three if the Straight Line (SL) depreciation method is used? b) Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device's life (the remaining three years). What is the device's BV at the end of four years?
Determine the average rate of return for a project that is estimated to yield total income of $386,400 over four years, has a cost of $579,600, and has a $64,400 residual value.
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%
Determine the average rate of return for a project that is estimated to yield total income of $220,800 over 4 years, cost $419,000, and has a $41,000 residual value.
Determine the average rate of return for a project that is estimated to yield total income of $356,400 over 4 years, costs $601,000, and has a $59,000 residual value.%
If produced by Plan A, a producer’s initial capital cost will be $120,000, its annual operating cost will be $30,000, and its salvage value after 4 years will be 20,000. With Plan B, there is a first cost of $240,000, an annual operating cost of $10,000, and $40,000 salvage value after 4-year life. Based on a present worth analysis at 15% interest rate, which plan should be chosen?
A project with a life of 10 has an initial fixed asset investment of $25,620, an initial NWC investment of $2,440, and an annual OCF of −$39,040. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is the project's equivalent annual cost, or EAC? Show equations using excel.
An investment of $50,000 in R&D results in additional revenue of $28,720 after 5 years and another revenue of $61,892 after 10 years. What is the rate of return on the investment?
The expected annual net income is $200,000; the average investment is $800,000; and depreciation expense is $50,000. The annual rate of return is
Two techniques can be used to produce expansion anchors. Technique A costs $90,000 initially and will have a $12,000 salvage value after 3 years. The operating cost with this method will be $33,000 in year 1, increasing by $2600 each year. Technique B will have a first cost of $113,000, an operating cost of $7000 in year 1, increasing by $7000 each year,and a $43,000 salvage value after its 3-year life. At an interest rate of 13% per year, which technique should be used on the basis of a present worth analysis? Notice that there are no revenues. Please work out and do not use excel, however if you use excel please show how to input everything needed down to the formula, thank you!
Determine the average rate of return for a project that is estimated to yield total income of $250,640 over 4 years, costs $439,000, and has a $43,000 residual value.