Exercise 14-4 (Algo) Uncertain Future Cash Flows [LO14-4]Lukow Products is investigating the purchase of automated equipment that will save $110,000 each year in direct labor andinventory carrying costs. This equipment costs $700,000 and is expected to have a 6-year useful life with no salvage value. Thecompany's required rate of return is 8% on all equipment purchases. Management expects this equipment to provide intangiblebenefits such as greater flexibility and higher-quality output that will increase future cash inflows.Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.Required:1. What is the net present value of the piece of equipment before considering its intangible benefits?Note: Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.2. What minimum dollar value per year must be provided by the equipment's intangible benefits to justify the $700,000investment?Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.1. Net present value2. Minimum dollar value

Answered: Exercise 14-4 (Algo) Uncertain Future…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Exercise 14-4 (Algo) Uncertain Future Cash Flows [LO14-4] Lukow Products is investigating the purchase of a piece of automated equipment that will save $150,000 each year in direct labor and inventory carrying costs. This equipment costs $940,000 and is expected to have a 7-year useful life with no salvage value. The company’s required rate of return is 14% on all equipment purchases. Management anticipates that this equipment will provide intangible benefits such as greater flexibility and higher-quality output that will result in additional future cash inflows. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the net present value of the piece of equipment before considering its intangible benefits? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. What minimum dollar value per year must be provided by the equipment’s intangible benefits to…
Uncertain Future Cash Flows Lukow Products is investigating the purchase of a piece of automated equipment that will save $400,000 each year in direct labor and inventory carrying costs. This equipment costs $2,500,000 and is expected to have a 15-year useful life with no salvage value. The company’s required rate of return is 20% on all equipment purchases. Management anticipates that this equipment will provide intangible benefits such as greater flexibility and higher-quality output that will result in additional future cash inflows. Required: 1. What is the net present value of the piece of equipment before considering its intangible benefits? 2. What minimum dollar value per year must be provided by the equipment’s intangible benefits to justify the $2,500,000 investment?
The Marigold Company is planning to purchase $577,000 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment. Year 1 2 3 456 7 Total Projected Cash Flows $214,000 169,500 124,500 Payback period 55,200 55,200 48,500 The company 48,500 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. $715,400 years and (b) If Marigold requires a payback period of 4 years or less, should the company make this investment? months. make this investment.
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Basic Concepts Sato Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,200,000. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses 1 $2,940,000 $2,280,000 2 2,940,000 2,280,000 3 2,940,000 2,280,000 4 2,940,000 2,280,000 5 2,940,000 2,280,000 The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Compute the project's payback period. If required, round your answer to two decimal places.fill in the blank 1 years 2. Compute the project's accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box).fill in the blank 2 % 3. Compute the project's net present value, assuming a required rate of return of 10…
412 Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below. Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $654,842. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,200,000 $1,000,000 2 1,200,000 1,000,000 3 1,200,000 1,000,000 4 1,200,000 1,000,000 5 1,200,000 1,000,000 Required: Compute the Investment's Internal Rate of return. Enter as a percent. If required, round your answer to the nearest whole percent.IRR = %
Subject: acounting
S9.

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