KM Builders Co purchases a new excavator costing £50,000. Its expected useful life is ten years, at which point it is anticipated that theexcavator will have a residual value of £18,000. If the straight-line method of depreciation is used, what is the carrying amount of theexcavator at the end of 4 years?O A. £32,000O B. £48,000OC. £50,000OD. £37,200

The objective of the question is to calculate the carrying amount of the excavator at the end of 4…

Answered: KM Builders Co purchases a new…

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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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 income of $152,000. The equipment will have an initial cost of $494,000 and a 8 year useful life. If the salvage value of the equipment is estimated to be $78,000, what is the payback period? Multiple Choice 2.42 years 3.25 years 8.00 years 4.00 years
Lovewell Limited a food manufacturer is considering purchasing a new machine for £275,000. Thecompany is expecting an annual cash inflow of £85,000 from the sale of products and an annual cashoutflow of £12,500 for each of the six years of the machine’s useful life. The annual cash outflows donot include annual depreciation charges for the machine. The machine is depreciated using thestraight –line method. The machine is expected to last for six years, with a residual value estimated tobe at the rate of 15% of the original cost of the machine. The cost of capital for Lovewell Limited is12%.You are required to:1. Calculate using the following investment appraisal techniques, and provide brief recommendationsas to the economic feasibility of acquiring the machine:a. The Payback Period.b. The Accounting Rate of Return.c. The Net Present Value.d. The Internal Rate of Return (to two decimal places)
Enerlam Company purchased a machine with an estimated useful life of seven years. The machine will generate cash inflows of P9,000 each year over the next seven years. If the machine has no salvage value at the end of seven years, and assuming the company's discount rate is 10%, what is the purchase price of the machine if the net present value of the investment is P17,000?a. P43,812b. P26,812c. P17,000d. P22,195
Emma Company is considering buying a machine for $206,000 with an estimated life of 15 years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $20,500 each year. The cash payback on this investment is Round your answer 2 decimal places Selected Answer: 6,766.67 Correct Answer: 6.02 ± 0.05
Lovewell Limited a food manufacturer is considering purchasing a new machine for£275,000. The company is expecting an annual cash inflow of £85,000 from the sale of products and an annual cash outflow of £12,500 for each of the six years of the machine’s useful life. The annual cash outflows do not include annual depreciation charges for the machine. The machine is depreciated using the straight –line method. The machine is expected to last for six years, with a residual value estimated to be at the rate of 15% of the original cost of the machine. The cost of capital for Lovewell Limited is 12%.Calculate using the following investment appraisal techniques, and provide brief recommendations as to the economic feasibility of acquiring the machine:i. The Payback Period.ii. The Accounting Rate of Return.iii. The Net Present Value.iv. The Internal Rate of Return (to two decimal places)
GIVEN: Project C requires $800,000 net initial investment for new machinery with a 8-year life and a Salvage Value of $40,000. The company uses straight-line depreciation. Project C is expected to yield an annual Net Income of $65,000 per year. What is the Payback Period using the above information? A) 5 years B) 6 years C) 7 years D) 8 years E) None of the above
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
Heidi Company is considering the acquisition of a machine that costs $453,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash inflow of $119,000, and annual operating income of $80,621. The estimated cash payback period for the machine is (round to one decimal point)? Oa. 18 years Ob. 5.6 years Oc. 50 years Od. 65 years
A company buys a £300 computer in Year 1 and capitalizes the expenditure. Th e computer has a useful life of three years and an expected salvage value of £0, so the annualdepreciation expense using the straight-line method is £100 per year. Compared to expensing the entire £300 immediately, the company’s pretax profit in Year1 is £200 greater.1. Assume that the company continues to buy an identical computer each year at thesame price. If the company uses the same accounting treatment for each of the computers, when does the profit-enhancing eff ect of capitalizing versus expensing end?2. If the company buys another identical computer in Year 4, using the same accounting treatment as the prior years, what is the eff ect on Year 4 profits of capitalizingversus expensing these expenditures?
onsider the following financial informationabout a retooling project at a computer manufacturing company:• The project costs $2.5 million and has a five-yearservice life.• The retooling project can be classified as sevenyear property under the MACRS rule.• At the end of the fifth year, any assets held for theproject will be sold. The expected salvage valuewill be about 10% of the initial project cost.• The firm will finance 40% of the project moneyfrom an outside financial institution at an interestrate of 10%. The firm is required to repay the loanwith five equal annual payments.• The firm’s incremental (marginal) tax rate on theinvestment is 35%.• The firm’s MARR is 18%.With the preceding financial information,(a) Determine the after-tax cash flows.(b) Compute the annual equivalent worth for thisproject.
1666
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