IronZee Industries is adding a new product line that will require an investment of $1,268,000. It is estimated this investment will have a 10-year life and will generate net cash inflows of $296,000 the first year, $266,000 during the second year, and $235,000 each year thereafter for 8 years. The project will have $0.00 residual value. Compute the ARR for the investment. (Round your answers to two decimal places when needed and use rounded answers for all future calculations). IronZee Industries Total net cash inflows during operation life of expansion Less: Total depreciation during operating life of expansion Total operating income during operating life Divide by: expansions operating life in years Average annual operating income from expansion (Amount Invested + Residual Value) / 2 / 2 = = Average amount Invested Average annual operating income / Average amount invested = = ARR (%)
IronZee Industries is adding a new product line that will require an investment of $1,268,000. It is estimated this investment will have a 10-year life and will generate net cash inflows of $296,000 the first year, $266,000 during the second year, and $235,000 each year thereafter for 8 years. The project will have $0.00 residual value. Compute the ARR for the investment. (Round your answers to two decimal places when needed and use rounded answers for all future calculations). IronZee Industries Total net cash inflows during operation life of expansion Less: Total depreciation during operating life of expansion Total operating income during operating life Divide by: expansions operating life in years Average annual operating income from expansion (Amount Invested + Residual Value) / 2 / 2 = = Average amount Invested Average annual operating income / Average amount invested = = ARR (%)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 4CE: Manzer Enterprises is considering two independent investments: A new automated materials handling...
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![IronZee Industries is adding a new product line that will require an investment of $1,268,000. It is estimated
this investment will have a 10-year life and will generate net cash inflows of $296,000 the first year,
$266,000 during the second year, and $235,000 each year thereafter for 8 years.
The project will have $0.00 residual value. Compute the ARR for the investment.
(Round your answers to two decimal places when needed and use rounded answers for all future
calculations).
IronZee Industries
Total net cash inflows during operation life of expansion
Less: Total depreciation during operating life of expansion
Total operating income during operating life
Divide by: expansions operating life in years
Average annual operating income from expansion
(Amount Invested + Residual Value) / 2
/ 2 =
=
/
Average amount Invested
Average annual operating income / Average amount invested
=
=
ARR (%)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa9234f56-3fcb-488d-9506-990582596f35%2F80812b94-7cb2-4008-98f8-7e09afd5b40e%2F0r4tsu9_processed.png&w=3840&q=75)
Transcribed Image Text:IronZee Industries is adding a new product line that will require an investment of $1,268,000. It is estimated
this investment will have a 10-year life and will generate net cash inflows of $296,000 the first year,
$266,000 during the second year, and $235,000 each year thereafter for 8 years.
The project will have $0.00 residual value. Compute the ARR for the investment.
(Round your answers to two decimal places when needed and use rounded answers for all future
calculations).
IronZee Industries
Total net cash inflows during operation life of expansion
Less: Total depreciation during operating life of expansion
Total operating income during operating life
Divide by: expansions operating life in years
Average annual operating income from expansion
(Amount Invested + Residual Value) / 2
/ 2 =
=
/
Average amount Invested
Average annual operating income / Average amount invested
=
=
ARR (%)
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