Exercise 12-8 Payback Period and Simple Rate of Return [LO12-1, LO12-6][The following information applies to the questions displayed below.]Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The gameswould cost a total of $300,000, have an eight-year useful life, and have a total salvage value of $20,000. The companyestimates that annual revenues and expenses associated with the games would be as follows:Revenues$200,000Less operating expenses:Commissions to amusement houses$100,000Insurance7,000Depreciation35,000Maintenance18,000160,000Net operating income$ 40,000 Exercise 12-8 Part 1Required:1a. Compute the payback period associated with the new electronic games.1b. Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Wouldthe company purchase the new games?Complete this question by entering your answers in the tabs below.Req 1AReq 1BCompute the payback period associated with the new electronic games.Payback periodyears<Reg 1AReq 1B >

Payback period refers to the period within which the sum invested by the company in a project will…

Answered: Exercise 12-8 Part 1 Required: 1a.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Q-5 (12,13,14)
Question 5 t yet anwered On Oct 1, 2015, Short company ordered some equipment from a supplier for 200,000 euros. Delivery and payment will occur on Nov 30, 2016. The spot rates on Oct 1 and Nov 30 are $1.50 and $1.30 tarked out of L00 If the company does not hedge the commitment, at what amount is the equipment recorded on Nov 307 Fag question O a $270,000 O b. $300,000 O. $260,000 O d. None of the above
Question Content Area Ralston Consulting, Inc., has a $48,000 overdue debt with Supplier No. 1. The company is low on cash, with only $13,440 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways: Option 1: Pay $13,440 now and $45,600 when some large projects are finished, two years from today. Option 2: Pay $67,200 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (10%). (Click here to see present value and future value tables) A. Calculate the present value of each option. Round your present value factor to three decimal places and final answer to the nearest dollar. Present value of Option 1 $fill in the blank 1 Present value of Option 2 $fill in the blank 2 B. Which option should Ralston choose?
QUESTION 1 An auto-parts company is deciding whether to sponsor a racing team for a cost of $3061679. The sponsorship would last for 11 years and is expected to have cash flows by $410714 per year. If the discount rate is 11.64%, what will be the change in the value of the company if it chooses to go ahead with the sponsorship?
QUESTION 30 WKU is doing the following two research projects: X: Developing identity theft prevention software. The software will be sold in the market. Y: Cost reimbursement contract with the US Treasury Department. WKU performs a financial fraud detection research and it will be reimbursed 250% of the reported costs incurred in the project. For each project, WKU incurred both direct and indirect costs. WKU incurred a total of $1,000,000 indirect costs. Indirect costs are allocated using a base chosen by WKU. The following information is given: Project Direct costs Computer time in hours (CTH) Pages of all articles read (PAR) Lab experimental hours (LEH) Number of assistants used (NAU) X $1,000,000 5,000 65,000 1,000 300 Y $2,500,000 5,000 35,000 4,000 500 Which of the following allocation bases is the best for the benefit of WKU? A. CTH B. LEH C. PAR…
12q-4
See attached. 13
Exercise 10-12A (Algo) Determining the payback period LO 10-4 Fanning Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $14,800,000; It will enable the company to Increase its annual cash Inflow by $3,700,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $34,800,000; It will enable the company to increase annual cash flow by $5,800,000 per year. This plane has an eight-year useful life and a zero salvage value. Required *1. Determine the payback period for each Investment alternative. a2. Identify the alternative Fanning should accept if the decision is based on the payback approach. Note: Round your answers to 1 decimal place. a-1. Alternative 1 (First plane) a-1. Alternative 2 (Second plane) a-2. Fanning should accept Payback Period years years
Required information Exercise 12-8 (Algo) Payback Period and Simple Rate of Return [LO12-1, LO12-6] [The following information applies to the questions displayed below.] Nick’s Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 300,000 Less operating expenses: Commissions to amusement houses $ 90,000 Insurance 72,000 Depreciation 23,520 Maintenance 40,000 225,520 Net operating income $ 74,480 Exercise 12-8 Part 1 (Algo) Required: 1a. Compute the payback period associated with the new electronic games. Payback period (answer in years) 1b. Assume that Nick’s Novelties, Incorporated, will not purchase new games unless they provide a payback period of…
ces W [The following information applies to the questions displayed below.] Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income Exercise 12-8 Part 1 (Algo) Complete this question by entering your answers in the tabs below. Req 1A $ 90,000 58,000 18,600 70,000 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Incorporated, will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games? Req 1B.
es Problem 12-27 (Algo) MACRS depreciation and net present value [LO12-4] Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12-11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset will cost $220,000, and it will produce earnings before depreciation and taxes of $72,000 per year for three years, and then $35,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capital is 14 percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Net present value b. Based on the…
mni.3

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS

Exercise 12-8 Part 1 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?