Question Completion Status:The XYZ Company is considering investing in two alternative projects:Project 1W$400,0005B.C.D.InvestmentUseful life (years)Estimated annual net cash inflows foruseful lifeResidual valueDepreciation methodRequired rate of returnWhat is the payback period for Project 2?16.00 years4.00 years5.00 years4.70 years$100,000$25,000Straight-line12%Project 2$250,0006$50,000$15,000Straight-line8%

The payback period is the time required to earn back the amount invested in an asset from its net…

Answered: A. B. Investment Useful life (years)…

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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Project Year MACRS Depreciation Rate Year 0 Year 1 33.33% 44.45% Year 2 14.81% Year 3 7.41% A machine is purchased for $850,000 and is used through the end of Year 2. The machine will be depreciated using the 3-Year MACRS schedule in the table above. At the end of Year 2, the machine is sold for $75,000. What is the after-tax cash flow from the sale of the machine at the end of Year 2 if the firm's marginal tax rate is 35%? O $57,962 $70,795 O $79,608 O $55,998 O $62,985 O $75,000
What is the annual after-tax operating cash flow? Table 3 Initial Equipment Project Life Sales Variable Costs Fixed Costs Tax rate Cost of Capital Ending Book Value Sales Price at Year 3 Net Working Capital $24,700 O $13,300 $32,250 $19,300 $55,000 3 Years $50,000 $20,000 $10,000 35% 10% $1,000 $20,000 $10,000
Net Present Value—Unequal Lives Project A requires an original investment of $97,800. The project will yield cash flows of $21,000 per year for 9 years. Project B has a computed net present value of $10,100 over a 6-year life. Project A could be sold at the end of 6 years for a price of $46,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3…
Year Cash Flow (A) Cash Flow (B) 0 −$ 417,000 −$ 36,000 1 48,000 19,600 2 58,000 14,100 3 75,000 14,600 4 532,000 11,400 The required return on these investments is 13 percent. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. Based on your answers in (a) through (d), which project will you finally choose?
Use Annual Cash Flow Analysis to choose which Alternative should the company choose, if the interest rate 12%. Data Alt. A Alt. B Alt. C Useful Life, Years 13 11 First Cost $2,300,000 $2,780,000 $2,540,000 Salvage Value $82,000 $118,000 $97,000 Annual Benefit $580,000 $670,000 $650,000 M&O $65,000 $78,000 $71,000 M&O Gradient $11,000 $15,000 $12,500
Internal Rate of Return A project is estimated to cost $350,265 and provide annual net cash flows of $57,000 for 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 1 0.909 0.893 0.870 0.833 1.833 1.690 1.528 1.736 1.626 2.673 3 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 4.355 4.111 3.784 3.326 6 4.917 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine the internal rate of return for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above. %
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Juniper Corporation is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $810,000 $466,000 Useful life 8 years 8 years Estimated annual net cash inflows for 8 years $130,000 $70,000 Residual value $58,000 $− Depreciation method Straight−line Straight−line Required rate of return 13% 10% What is the accounting rate of return for Proposal X? (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.)
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What is the payback period for a project with the following cash flows? Year 0 1 2 3 4 2.56 years O2.89 years 3.08 years 3.48 years Never Cash Flow -$75,000.00 $ 15,000.00 $ 23,000.00 $ 25,000.00 $ 25,000.00

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