A tea Company is considering an investment proposal to install new milling controls. The project cost is `. 50,000. The facility has life of 5 years and no salvage value. The company’s tax rate is 55 %. The estimated cash flows before tax (CFBT) from the proposed investment proposal are as follows:                                                                                            Year CFBT (`)  1 10,000  2 11,000  3 14,000  4 15,000  5 25,000 Compute the following: i) Pay- Back Period ii) Average rate of return iii) Net present value at 10% discount rate iv) Profitability index at 10% discount rate

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: What is the purchase price of the machine?

A: Purchase price of the machine or any asset is the cost of the asset which has been paid by the…

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: Two alternative machines (A and B) have been suggested each costing 4,50,000. C. Flow After Tax…

A: The net  рresent  vаlue  (NРV)  is  the  differenсe  between  the  рresent  vаlue  оf  саsh  inflоws…

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: NUBD Co. purchase a machine for P180,000, which will be depreciated on the straight-line basis over…

A: Initial Investment = 180,000 Useful life = N = 5 SLM Depreciation Depreciation expense = Initial…

Q: Dobson Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: Answer a) Calculation of Accounting Rate of Return Accounting Rate of Return = Average annual…

Q: Garrison Corporation is considering the replacement of an old machine that is currently being used.…

A: Sales value of old machine $60,000 Less: Book value of old machine $28,000 Gain on sales of old…

Q: ucky Cement wants to evaluate an acquisition of an equipment worth Rs 300,000. Its marginal tax rate…

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Q: Lor Industries is analyzing a capital investment proposal for new machinery to produce a new product…

A: 3 types of cash flow activities. Operating activities  Investing  Financing    Cash Outflow Cash…

Q: Builders Supply, Inc.is considering adding a new product line that is expected to increase annual…

A: Project fixed assets cost = $165,000 Life of assets = 8 Years Tax rate = 34%

Q: Ernie's Electrical is evaluating a project that will increase sales by $48,000 and costs by $16,000.…

A: Operating cash flow is an important metric that we use in capital budgeting. Operating cash flow is…

Q: Clemson Software is considering a new project whose data are shown below.  The required equipment…

A: Straight-Line Method is used to compute depreciation on fixed asset where equal depreciation for…

Q: What is the present worth of the after-tax cash flows?

A: We have to use Modified Accelerated Cost Recovery SystemDepreciation will be as follows:Here…

Q: A company is considering an investment proposal to install new milling machine. The project will…

A: Payback period and net present value is one of the methods under capital budgeting technique.…

Q: b. Cendrawasih Inc. is considering replacing the equipment it uses to produce crayons. The equipment…

A: Net income refers to the level of income a project generates after deducting all the expenses…

Q: A road construction company is considering the purchase of a gravel hauler as it prepares for a new…

A: The question is related to Internal Rate of Return (IRR) . IRR is the rate which equates the Present…

Q: Fitzgerald Computers is considering a new project whose data are shown below. The required equipment…

A: Equipment cost = $65,000Straight line depreciation rate = 33.33%Number of projects life = 4…

Q: The Gamma Inc. is planning to spend P600,000 for a machine that will depreciate on a straight-line…

A: Solution: Annual depreciation = P600,000 / 10 = P60,000 Annual operating income = Cash flow from…

Q: This question is based on the following in formation: An investment is Machinery costing P 250,000…

A: Annual tax shield will the tax saved on depreciation of assets. Annual Depreciation =(Cost of…

Q: St. John's & Sons Sanitation Services is evaluating a project that will increase annual sales by…

A: Operating cashflow = (Increase Annual sales - Annual Cash cost) * (1-tax rate) + tax benefit on…

Q: The Jacob Chemical Company is considering building a new potassium sulfate plant. The following cash…

A: Period Cash outlay ($) Discount Factor @12% Net investment ($) 0 4,000,000 1 4,000,000 1…

Q: A certain company is considering the use of a concrete electric pole in the expansion of its power…

A: In the given question we are provided with the data of a certain company that is using a concrete…

Q: A Company is considering a proposal of installing a drying equipment. The equipment would involve a…

A: The Payback Period tracks the duration for an investment to recover its initial cost, while the…

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

A: Operating Cash flow is the amount which is earned by the investor from the project. It is the net…

Q: A project requires purchase of machinery for $150,000. The project generates an annual after-tax ope…

A:

Q: A project will increase sales by $60,000 and cash expenses by $51,000. The project will cost $40,000…

A: Annual increase in sales = $60,000Annual cash expenses = $51,000Cost = $40,000useful life = 4…

Q: NUBD Co. purchase a machine for P180,000, which will be depreciated on the straight-line basis over…

A: Calculation of present value of cash Inflows:::: AAnnual cash flows::P40,000 Less: Depreciation…

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

A: In this question, we are required to determine the depreciation tax shield.

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.