Dogwood Company is considering a capital investment in machinery:(Click the icon to view the data.)8.Calculate the payback.9.Calculate the ARR. Round the percentage to two decimal places.10. Based on your answers to the above questions, should Dogwood invest in the machinery?8. Calculate the payback.Amount investedExpected annual net cash inflowPayback1,500,00024500,0003years9. Calculate the ARR. Round the percentage to two decimal places.Average annual operating incomeAverage amount investedARRData TableInitial investment$1,500,000Residual value350,000Expected annual net cash inflows500,000Expected useful life4 yearsRequired rate of return15%

Annual depreciation = (Cost of the assets - Salvage value) / Life of the assets = ($1,500,000 - $350,000) / 4 years = $287,500 Average annual operating income = Annual cash inflows - depreciation = $500,000 - $287,500 = $212,5008. Amount investment / Annual cash inflows = Payback $1,500,000 / $500,000 = 3 years 9. Average annual operating income / Average amount invested = ARR $212,500 / ($1,500,000+$350,000)/2 = $925,000 = 22.97% 10. yes, he should invest.

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Dogwood Company is considering a capital investment in machinery: E (Click the icon to view the data.) Calculate the payback. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dogwood invest in the machinery? 8. 9. 8. Calculate the payback. Amount invested Expected annual net cash inflow Payback %3D 1,500,000 24 500,000 3 years %3D 9. Calculate the ARR. Round the percentage to two decimal places. Average annual operating income Average amount invested ARR % Data Table Initial investment 24 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 15%

Dogwood Company is considering a capital investment in machinery: E (Click the icon to view the data.) Calculate the payback. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dogwood invest in the machinery? 8. 9. 8. Calculate the payback. Amount invested Expected annual net cash inflow Payback %3D 1,500,000 24 500,000 3 years %3D 9. Calculate the ARR. Round the percentage to two decimal places. Average annual operating income Average amount invested ARR % Data Table Initial investment 24 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 15%

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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