Fargo Corp, is considering the purchase of a new pilece of equipment The equipment costs $51,400 and will have a salvage value of $6,400 after nine years. Using the new piece of equipment will increase Fargo's annual cash flows by $7.400. Fargo has a hurdle rate of 13%. a. How much is Fargo's annual depreciation on the equipment? DeprecieSion b. What is Fargo's projected annual increase in net income? Net Income c. What is the accounting rate of return for purchasing the new plece of equipment? (Round your answer to 2 decimal places,) Rate of Retun

Fargo Corp, is considering the purchase of a new pilece of equipment The equipment costs $51,400 and will have a salvage value of $6,400 after nine years. Using the new piece of equipment will increase Fargo's annual cash flows by $7.400. Fargo has a hurdle rate of 13%. a. How much is Fargo's annual depreciation on the equipment? DeprecieSion b. What is Fargo's projected annual increase in net income? Net Income c. What is the accounting rate of return for purchasing the new plece of equipment? (Round your answer to 2 decimal places,) Rate of Retun

Name: .What is Fargo's projected annual increase in net income?What is the
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: .What is Fargo's projected annual increase in net income?What is the accounting rarte of return for purchasing the new piece of equipment? (Round your answer to 2 decimal places.)ahe of henturmd. Based on financial factors, should Fargo purchase the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Can you please check my work

A: Accounting rate of return is equal to net income divided by average investment.

Q: Cortland Corp is considering the purchase of a new piece of equipment. The cost savings from the…

A: annual net income = annual increase in net cash flows - Depreciation If no specific method is given…

Q: Addison Corp. is considering the purchase of a new piece of equipment. The equipment will have an…

A: Cash flows are the cash generated from the operation of the business organisation. In other words,…

Q: In 2021, Crane Corporation began construction work under a three-year contract. The contract price…

A: Solution: Cash collected in 2021 on this contract = Contract billings - Accounts receivables

Q: 5. Armor Investment Company is considering the acquisition of a heavily depreciated building on 10…

A: NOINet Operating Income (NOI) is a financial tool that indicates the income earned from a property…

Q: None

A: To address the questions in the image, let's break down the problems and solve them…

Q: Newport Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: Net Present Value is a method of capital budgeting that is used to determine which of the projects…

Q: erez Manufacturing Company has an opportunity to purchase some technologically advanced equipment…

A: IRR stands for internal rate of return. It is an important capital budgeting tool. IRR is the rate…

Q: Newport Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: Initial cost (C) = $924000 Annual increase in cashflow (A) = $251020 n = 6 years Let r = Accounting…

Q: Blender Inc. purchased a new piece of equipment that cost $120,000. The equipment will be used for…

A: NET PRESENT VALUE Net Present Value is one of the Important Capital Budgeting Technique. Net…

Q: ast year you purchased a machine for $1M. You want to sell it today for $0.8M and replace it with a…

A: When the old machines become outdated then these are to be replaced by new machine to increase cash…

Q: Fargo Corp. is considering the purchase of a new plece of equipment The equipment costs $51,400 and…

A: Answer a) Calculation of Annual Depreciation on Equipment Annual Depreciation on Equipment =…

Q: Ltd is considering investing in the purchase of new equipment The equipment will cost $350 000…

A: The accounting rate of return, often known as the average rate of return, or ARR, is a financial…

Q: Welcome Inn Hotels is considering the construction of a new hotel for $81 million. The expected life…

A: Net present value is the excess of present value of cash inflows over cash outflows during the…

Q: A company buys a machine for $80,000 that has an expected life of 10 years and no salvage value. The…

A: Formula: Accounting rate of return = Net Income after tax / Average investment. Division of average…

Q: Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: * Your answer is incorrect. Sheridan Oil Company is considering investing in a new oil well. It is…

A: The first step in calculating the annual rate of return is to determine the annual net income. This…

Q: Grady Corp. is considering the purchase of a new piece of equipment. The equipment costs $50,700,…

A: Solution a: Present value of increase in annual cash flows = $6,110 * PVA of 1 at 13% for 6 periods…

Q: Welcome Inn Hotels is considering the construction of a new hotel for $81 million. The expected life…

A: Discounted Cash Flow Analysis of purchase of hotel at 12% discount rate Particulars…

Q: Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will…

A: Annual Rate of Return:The annual rate of return from an investment is a measure used to evaluate the…

Q: Your firm, Agrico Products, is considering the purchase of a tractor that has a net cost of $72,000,…

A: Net Present Value: To determine the current value of a future stream of payments, one uses net…

Q: To open a new store, Benson Tire Company plans to invest $280,000 in equipment expected to have a…

A: Net cash flows are computed by deducting the cash outflows from the cash inflows.Net cash flow =…

Q: To open a new store, Adams Tire Company plans to invest $348,000 in equipment expected to have a…

A: Net cash flow represents the difference between cash inflows and outflows in a business or financial…

Q: Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will…

A: Net income:= $139,070 - $82,000= $57,070

Q: Raliegh, a nonprofit organization, estimates that it can save $23,000 a year in cash operating costs…

A: b.) Payback PeriodPayback period = Initial Investment /Cash Inflow= 90000 / 23000= 3.9130 yearsc.)…

Q: Homer Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: Income after tax = $ 169650 Initial cost = $ 585000 Life = 5 Years Salvage value = $ 25000 Annual…

Q: 9. Lt. Dan Corporation invested S80,000 in a manufacturing equipment. The salvage value of the asset…

A: The rate of return on investment shows the percentage of return earned by the company on the money…

Q: Grumpy Publishing is considering the purchase of a used printing press costing $84,200. The printing…

A: Internal Rate of Return is also known is IRR. It is a capital budgeting techniques which help in…

Q: Need help with this Question

A: Step 1:

Q: Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will…

A: Annual rate of return= Annual income/Average investment

Q: * Your answer is incorrect. Sheridan Oil Company is considering investing in a new oil well. It is…

A: The first step in calculating the annual rate of return is to determine the annual net income. This…

Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

.What is Fargo's projected annual increase in net income?
What is the accounting rarte of return for purchasing the new piece of equipment? (Round your answer to 2 decimal places.)
ahe of henturm
d. Based on financial factors, should Fargo purchase the new equipment?
O Yes
ONo
Next

Fargo Cop, is considering the purchase of a new piece of equipment. The equipment costs $51,400 and will have a salvage value of
$6,400 after nine years. Using the new piece of equipment will increase Fargo's annual cash flows by $7,400. Fargo has a hurdle rate
of 13%.
a. How much is Fargo's annual depreciation on the equipment?
DepreciaSon
b. What is Fargo's projected annual increase in net income?
Net Income
c. What is the accounting rate of return for purchasing the new plece of equipment? (Round your answer to 2 decimal places.)
Rate of Retum

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

To open a new store, Finch Tire Company plans to invest $250,000 in equipment expected to have a five-year useful life and no salvage value. Finch expects the new store to generate annual cash revenues of $322,000 and to incur annual cash operating expenses of $187,000. Finch's average income tax rate is 35 percent. The company uses straight-line depreciation. Required Determine the expected annual net cash inflow from operations for each of the first four years after Finch opens the new store. Note: Negative amounts should be indicated by a minus sign. Year 1 Year 2 Year 3 Year 4 Net cash Inflow or Outflow
What is the NPV assuming a 12% rate of return. (ignore Tax) Bramble Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Depreciation is $10, 230 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600. Calculate NPV assuming a 12% rate of return Bramble Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $81,840 Cost $41,000 8 years $11,200 $0 $35,700 New Equipment Estimated useful life Salvage value in 8 years Annual cash operating costs $38,000 8 years $4,600 $30,700 Depreciation is $10,230 per…
Can you please check my work
To open a new store, Zachary Tire Company plans to invest $378,000 in equipment expected to have a seven-year useful life and no salvage value. Zachary expects the new store to generate annual cash revenues of $322,000 and to incur annual cash operating expenses of $192,000. Zachary's average income tax rate is 40 percent. The company uses straight-line depreciation. Required Determine the expected annual net cash inflow from operations for each of the first four years after Zachary opens the new store. Note: Negative amounts should be indicated by a minus sign. Year 1 Year 2 Year 3 Year 4 Net cash Inflow or Outflow
Novel Industries purchases a 41.2 million cyclo-converter. The cyclo-converter will be depreciated by 10.30 million per year over 4 years, starting this year. Suppose Nokela's tax rate is 40%. a) a. What impact will the cost of the purchase have on earnings for each of the next 4 years? b) What impact will the cost of the purchase have on the firm's cash flow for the next 4 years?
...txt Quail Company is considering buying a food truck that will yield net cash inflows of $13,600 per year for seven years. The truck costs $43,000 and has an estimated $6,600 salvage value at the end of the seventh year. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Enter negative net present values, if any, as negative values. Round your present value factor to 4 decimals.) What is the net present value of this investment assuming a required 8% return? ! 1 Years 1-7 Totals Net present value A Q D F1 @ 2 W F2 # 3 E 80 F3 Net Cash Flows x PV Factor APR 11 $ 4 R a F4 % 5 * 8 1 l DII F8 U I ( 9 F9 A ) 0 0 S F10 A S D F G H J K L P
6. A drill press costs $30,000 and is expected to have a 10 year life. The drill press will be depreciated on a straight-line basis over 10 years to a zero estimated salvage value. This machine is expected to reduce the firm's cash operating costs by $4,500 per year. If the firm is in the 40 percent marginal tax bracket, determine the annual net cash flows generated by the drill press.
This question is based on the following in formation: An investment is Machinery costing P 250,000 with a 4-year life and no salvage value is expected to produce the following net income after taxes of 30%: End of year 1 P 17,000 2 22,000 3 25,000 4 26,000 How much is the annual tax shield?How much is the annual tax shield?A. P 17,580B. P 17,850C. P 18,570D. P 18,750What is the ROI (using the cash income)? A. 6.3%B. 9%C. 31.3%D. 34%
Nguyen Company has an opportunity to purchase an asset that will cost company $59,000. The asset is expected to add $23,000 per year to the company’s net income. Assuming the asset has a five-year useful life and zero salvage value, the unadjusted rate of return based on the average investment will be ?
Pharoah Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $122,480 and will increase annual expenses by $65,000 including depreciation. The oil well will cost $468,000 and will have a $11,000 salvage value at the end of its 10-year useful life. Calculate the annual rate of return. (Round answer to 0 decimal places, eg. 13%) Annual rate of return %
Homer Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $143,000. The equipment will have an initial cost of $550,000 and have a 5-year life. If the salvage value of the equipment is estimated to be $18,000, what is the annual net cash flow? Multiple Choice 3 $125,000 $36,600 $249,400 $161,000
1.