Exercise 16-12A (Algo) Determining the payback period LO 16-4 Baird Airline Company is considering expanding its teritory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $13.020,000, it will enable the company to increase its annual cash inflow by $6.200,000 per year. The plane is expected to have a useful lide of five years and no salvage value. The second plane costs $40,040,000, it will enable the company to increase annual cash flow by $9.100,000 per year. This plane has an eight-year useful life and a zero salvage value Required 6. Determine the payback period for each investment alternative and identify the altenative Baird should accept if the decision is based on the payback approach (Round your answers to 1 decimel place.) Payback Perlod a-1. Alternative 1 (First plane) years Altemative 2 (Second plane) years

Exercise 16-12A (Algo) Determining the payback period LO 16-4 Baird Airline Company is considering expanding its teritory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $13.020,000, it will enable the company to increase its annual cash inflow by $6.200,000 per year. The plane is expected to have a useful lide of five years and no salvage value. The second plane costs $40,040,000, it will enable the company to increase annual cash flow by $9.100,000 per year. This plane has an eight-year useful life and a zero salvage value Required 6. Determine the payback period for each investment alternative and identify the altenative Baird should accept if the decision is based on the payback approach (Round your answers to 1 decimel place.) Payback Perlod a-1. Alternative 1 (First plane) years Altemative 2 (Second plane) 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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Exercise 14-2 (Algo) Net Present Value Analysis [LO14-2] The management of Kunkel Company is considering the purchase of a $20,000 machine that would reduce operating costs by $5,000 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 13%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the net present value of the investment in the machine. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Use the appropriate table to determine the discount factor(s).) Net present value…
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3 TWO PROJECTS A company wishes to use a five-year time scale over which to appraise the following projects, with no allowance for scrap values. Its required rate of return is 17%. Project X Purchase of patent rights to a new process at an initial cost of $320,000 payable immediately. The new process will enable the company to reduce its labour force, at present incurring a total wages bill of $280,000, by a quarte: and will allow an increased production capacity of 5,000 units per year of another existing product which at present is sold at $12 per unit with direct costs of $6. There is an 80% chance that the extra potential production could all be sold, with a 20% chance of demand only taking up an extra 3,000 units per year. Production would be adjusted to match demand. This product is made with hardly any labour. Project Y Installation of a mini-computer to deal with the accounting functions at an annual rental charge of $50.000, paid in advance At present the company uses an IT…
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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
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Example#19 SW# A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market (salvage) value of $5,000 at the end of its expected life of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the value of the additional production. Suppose that E=MARR= 20% per year. Wha is the project's ERR, and is the project acceptable? Create a Cashflow diagram. IND
3 #12 Palmer Corporation is considering the purchase of a new plece of equipment. The cost savings from the equipment would result in an annual increase in net operating income of $100,000. The equipment will have an initial cost of $400,000 and a 7-year useful life. If the salvage value of the equipment is estimated to be $75,000, what is the accounting rate of return? Multiple Choice 14.28% 25.00% 4211% 147.37% Q