General Accounting Question Largo Freightlines plans to build a new garage inthree (3) years to have more space for repairing itstrucks. The garage will cost $400,000. What lump-sum amount should the company invest now to havethe $400,000 available at the end of the three-yearperiod? Assume that the company can invest moneyat eight percent.

Step 1: Define Present Value of InvestmentThe equivalent value of an expected cash flow in today's…

Answered: Largo Freightlines plans to build a new…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 10PA: The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000,...

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Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
Conestoga Plumbing plans to invest in a new pump that is anticipated to provide annual savings for 10 years of $50,000. The pump can be sold at the end of the period for $100,000. What is the present value of the investment in the pump at a 9% interest rate given that savings are realized at year end?
Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?
Largo Freightlines plans to build a new garage in three (3) years to have more space for repairing its trucks. The garage will cost $400,000. What lump- sum amount should the company invest now to have the $400,000 available at the end of the three-year period? Assume that the company can invest money at eight percent.
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Fraser Company will need a new warehouse in seven years. The warehouse will cost $350,000 to build. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: What lump-sum amount should the company invest now to have the $350,000 available at the end of the seven-year period? Assume that the company can invest money at: (Round your final answer to the nearest whole dollar amount.) Present Value 1. Ten percent 2. Seven percent
Central Mass Ambulance Service can purchase a new ambulance for $200,000 that will provide an annual net cash flow of $50,000 per year for five years. The salvage value of the ambulance will be $25,000. Assume the ambulance is sold at the end of year 5. Calculate the NPV of the ambulance if the required rate of return is 9%. (Round your answer to the nearest $1.) A) $(10,731) B) $10,731 C) $(5,517) D) $5,517
A newly constructed bridge costs $10,000,000. The same bridge is estimated to need renovation every 10 years at a cost of $1,000,000. Annual repairs and maintenance are estimated to be $100,000 per year.(a) If the interest rate is 5%, determine the capitalized-equivalent cost of the bridge.{b) Suppose that the bridge must be renovated every 15 years, not every10 years. What is the capitalized cost of the bridge if the interest rate is thesame as in (a)?(c) Repeat (a) and (b) with an interest rate of 10%. What can you say about the effect of interest on the results?
Foster Incorporated is trying to decide whether to lease or purchase a piece of equipment needed for the next 10 years. The equipment would cost $50,000 to purchase, and maintenance costs would be $5,000 per year. After 10 years, Foster estimates it could sell the equipment for $21,000. If Foster leases the equipment, it would pay $19,000 each year, which would include all maintenance costs. If Foster's cost of capital is 9%, Foster should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) Note: Use the appropriate factors from the PV tables. Multiple Choice lease the equipment, as the net present value of the cost is about $45,000 less. buy the equipment, as the net present value of the cost is about $48,700 less. lease the equipment, as the net present value of the cost is about $48,700 less. buy the equipment, as the net present value of the cost is about $50,000 less.
Thompson Corporation is considering the purchase ofa new piece of machinery. Thompson expects the new machinery toincrease its revenues by $70,000 at the end of year 1, S60,000 atthe end of year 2, and $50,000 at the end of year 3 at which point the machinery will have exhausted its useful life. If the interestrate is 4%, what is the most Thompson should be willing to paytoday for this piece of machinery? Explaination
The FernRod Motorcycle Company invested $150,000 at 4.5% compounded monthly to be used for the expansion of their manufacturing facilities. How much money will be available for the project in 5 1/2 years? (Round your answer to the nearest dolla
Foster Incorporated is trying to decide whether to lease or purchase a piece of equipment needed for the next 10 years. The equipment would cost $53,000 to purchase, and maintenance costs would be $5,200 per year. After 10 years, Foster estimates it could sell the equipment for $25,000. If Foster leases the equipment, it would pay $15,000 each year, which would include all maintenance costs. If Foster's cost of capital is 12%, Foster should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) Note: Use the appropriate factors from the PV tables. Multiple Choice buy the equipment, as the net present value of the cost is about $53,000 less. lease the equipment, as the net present value of the cost is about $10,400 less. buy the equipment, as the net present value of the cost is about $10,400 less. О lease the equipment, as the net present value of the cost is about $6,700 less.

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