MD will have to dispose of the old machine because the new machine would beinstalled in the same area. The old machine has no salvage value.Leidich has a performance evaluation and bonus plan based on ROI. The returnincludes any losses on disposal of equipment. Investment is computed based on theend-of-year balance of assets, net book value. Ignore taxes.Required:a. What is Measurement Division's ROI if it does not acquire the new machine?Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).b. What is Measurement Division's ROI this year if it does acquire the new machine?Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).c. If MD acquires the new machine and it operates according to specifications, whatROI is expected for next year?Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).Answer is complete but not entirely correct.4b. ROICROI55.2 %5.2%1.3%

To calculate the ROI for the Measurement Division (MD), we need to consider the following:1.…

Answered: MD will have to dispose of the old…

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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Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Project 1: Retooling Manufacturing Facility This project would require an initial investment of $5,050,000. It would generate $1,045,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $2,000,000. Project 2: Purchase Patent for New Product The patent would cost $4,100,000, which would be fully amortized over five years. Production of this product would generate $922,500 additional annual net income for Hearne. Project 3: Purchase a New Fleet of Delivery Trucks Hearne could purchase 25 new delivery trucks at a cost of $191,000…
Weston Clothing Company is considering manufacturing a new style of shirt, whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other Weston's products and would reduce their pre-tax annual cash flows. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.) Cost of capital Pre-tax cash flow reduction for other products (cannibalization) Investment cost (depreciable basis) Straight-line deprec. rate Sales revenues, each year for 3 years Annual operating costs (excl. deprec.) Tax rate O a. $7,550 b. $6,848 c. $7,190 d. $6,522 Oe. $6,196 10.0% $5,000 $80,000 33.333% $67,500 $25,000 25.0%
Walkin Inc. is considering the write-down of its long-term plant because of a lack of profitability. Explain to the management of Walkin how to determine whether a write-down is permitted.
Solomon Auto Repair, Inc. is evaluating a project to purchase equipment that will not only expand the company's capacity but also improve the quality of its repair services. The board of directors requires all capital investments to meet or exceed the minimum requirement of a 10 percent rate of return. However, the board has not clearly defined the rate of return. The president and controller are pondering two different rates of return: unadjusted rate of return and internal rate of return. The equipment, which costs $106,000, has a life expectancy of five years. The increased net profit per year will be approximately $6,100, and the increased cash inflow per year will be approximately $29,405. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a-1. Determine the unadjusted rate of return and (use average investment) to evaluate this project. (Round your answer to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).) a-2. Based on the…
Perez Auto Repair, Inc. is evaluating a project to purchase equipment that will not only expand the company's capacity but also improve the quality of its repair services. The board of directors requires all capital investments to meet or exceed the minimum requirement of a 10 percent rate of return. However, the board has not clearly defined the rate of return. The president and controller are pondering two different rates of return: unadjusted rate of return and internal rate of return. The equipment, which costs $109,000, has a life expectancy of five years. The increased net profit per year will be approximately $6,600, and the increased cash inflow per year will be approximately $28,023. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a-1. Determine the unadjusted rate of return and (use average investment) to evaluate this project. (Round your answer to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).) a-2. Based on the…
Which of the following is an example of a sunk cost? Select one: a. The firm pays to replant trees following the clear cutting of 1,000 acres during a timber harvest. b. The firm spends $20 million on heart medication research and discovers a promising drug. c. The firm replaces a piece of manufacturing equipment to maintain current manufacturing capacity. d. A bank opens a new office, and the new office leads to a decline in deposits at the bank's other offices. e. All of the above are examples of sunk costs.
(Ignore income taxes in this problem.) Your Company has a telephone system that is in poor condition. The system must be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives: Present System Proposed New System Purchase cost when new $100,000 $110,000 Accumulated depreciation 90,000 Overhaul cost needed now 80,000 Working capital required 50,000 Annual cash operating costs 30,000 20,000 Salvage value now of old system 10,000 Salvage value in 8 years 2,000 15,000 Your Company uses a 12% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years. What is the net present value of the new system alternative? Enter your answer without dollar signs. If the NPV is negative enter with a minus sign in front.
I got this wrong.
Do not provided hand written solution. Maintain quality and accuracy in ur answer.
makabhai this problem, given the same data has several different answers for the NPV. Please show in excel with formulas that correct answer. TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's NPV? WACC 10.0% Pre-tax cash flow reduction for other products (cannibalization) -$5,000 Investment cost (depreciable basis) $80,000 Straight-line deprec. rate 33.333% Sales revenues, each year for 3 years $67,500 Annual operating costs (excl. deprec.) -$25,000 Tax rate 35.0%
The company DstriBut.inc decides to take a technological shift by replacing its old distribution center with a new one that is more oriented towards technology and less dependent on manpower. The entire installation is estimated at $6,000,000 amortized at the rate of 30% decreasing. An immediate expense of $30,000 (taxable and non-depreciable) is planned to ensure the training of the personnel who will operate on the new installations. This investment creates a working capital requirement of $400,000, fully recoverable. The company estimates to increase its operating cash flow by $1,500,000 before tax. On the other hand, the company must assume an expense for the maintenance and replacement of consumable components of new installations in the amount of $50,000 every 2 years. This investment will have a residual value of $2,500,000 at the end of the investment horizon, which is set at 5 years by senior management. The tax rate is 40% and the rate of return required by senior management…
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