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

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Author:Libby

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Chapter1: Financial Statements And Business Decisions

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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?
i need solution. i.5
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
41
"It is estimated that a certain piece of equipment can save $22145 per year in labor and materials costs. The equipment has an expected life of 6 years and no market value. If the company must earn a 15.96% annual return on such investments, how much could be justified now for the purchase of this piece of equipment? Draw a cash-flow diagram from the company s viewpoint." A 62425.06 B 81685.01 170143.66 D 184740.67 E 61075.73
BE12.4 Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $200,000 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $34,000. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. How much would the reduction in downtime have to be worth in order for the project to be acceptable? Assume a discount rate of 9%. (Hint: Calculate the net present value.) Compute net present value and profitability index.
Subject: accounting
None
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