Jason Corporation has invested in a machine that cost $80,000, that has a useful life of eight years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of five years. Given these data, the simple rate of return on the machine is closest to: A. 6.8% B. 12% C. 7.5% D. 9%

Jason Corporation has invested in a machine that cost $80,000, that has a useful life of eight years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of five years. Given these data, the simple rate of return on the machine is closest to: A. 6.8% B. 12% C. 7.5% D. 9%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Cowen Collins recently invested in a project that promised an internal rate of return of 15 percent. If the project has an expected annual cash inflow of $12,000 for six years, with no salvage value, how much did Cowen pay for the project? Present value tables or a financial calculator are required. Select one: a. $72,000 b. $35,000 c. $31,708 d. $45,414
A profitable company making earth-moving equipment is considering an investment of $100,000 on equipment, which will have a 5-year useful life and, no salvage value. If money is worth 10%, which one of the following three methods of depreciation would be preferable? a. Straight line method b. SOYD method c. Two and half declining balance d. MACRS method
A piece of equipment has a first cost of $75000, a maximum useful life of 4 years, and a market (salvage) value described by the relation Sk = 60000 – 10500k, where k is the number of years since it was purchased. The AOC series is estimated using AOC = 30000 + 4500k. The interest rate is 9% per year. When should the company replace this asset?
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The management of Kanban Company is considering the purchase of a $27,000 machine that would reduce operating costs by $6,000 per year. At the end of the machine's six-year useful life, it will have zero salvage value. The company's required rate of return is 10%. ---------------------------------------- What is the total 'undiscounted' cash savings that this machine will provide over its useful life?
Kanye Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $166,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash flows by $32,982. Click here to view the factor table. What is its approximate internal rate of return? (Round answer to O decimal place, e.g. 13%.) Internal rate of return %
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A firm is considering an investment in new equipment that has the following information. Purchase Cost: $132,793 Salvage Value in five years time: $18,337 Useful life is 5 years and depreciation is determined using the straightline method. Expected increased annual cash flows are $52,651 What is the payback period in years? Calculate to 2 decimal places
A dynamic measurement machine used by Renshaw Instruments had an annual cash flow before taxes of $550,000 over its life of 10 years. Its first cost was $1.7 million, it was straight-line depreciated with n = 10 years, and it was sold today for the estimated salvage of $200,000. The company’s Te = 36% and after-tax MARR = 15%. Was the purchase and use of the machine economically justified?
Following is information on an investment in a manufacturing machine. The machine has zero salvage value. The company requires a 6% return from its investments. $ (260,000) 150,000 146,000 117,000 Initial investment Net cash flows: Year 1 Year 2 Year 3 Compute this machine's net present value. (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places. Round present value amounts to the nearest dollar.) Year 1 Year 2 Year 3 Totals Initial investment Net present value Net Cash Flow $ 0 Present Value Factor Present Value of Net Cash Flows $ $ 0

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