Metlock is contemplating a capital project costing $36076. The project will provide annual cost savings of $13600 for 3 years and have a salvage value of $3000. The company's required rate of return is 10%. The company uses straight-line depreciation. Year 1 2 3 Present Value PV of an Annuity of 1 at 10% 0.909 0.826 0.751 This project is of 1 at 10% 0.909 1.736 2.487 O unacceptable because it has a negative NPV. O acceptable because it has a positive NPV. Ounacceptable because it earns a rate less than 10%. O acceptable because it has a zero NPV.
Metlock is contemplating a capital project costing $36076. The project will provide annual cost savings of $13600 for 3 years and have a salvage value of $3000. The company's required rate of return is 10%. The company uses straight-line depreciation. Year 1 2 3 Present Value PV of an Annuity of 1 at 10% 0.909 0.826 0.751 This project is of 1 at 10% 0.909 1.736 2.487 O unacceptable because it has a negative NPV. O acceptable because it has a positive NPV. Ounacceptable because it earns a rate less than 10%. O acceptable because it has a zero NPV.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Do not give answer in image
Transcribed Image Text:Sunland Inc. is considering purchasing a machine that costs $209000 and is estimated to have no salvage value at the end of its 4-year
useful life. The straight-line method of depreciation is to be used. Projected annual cash inflows and outflows are as follows:
Year
1
2
3
4
Expected Annual
Cash Inflows
$82000
102000
105000
82000
The cash payback period is
2.59 years.
3.20 years.
O 2.25 years.
O 3.00 years.
Expected Annual
Cash Outflows
$22000
29000
29000
23000
Transcribed Image Text:Metlock is contemplating a capital project costing $36076. The project will provide annual cost savings of $13600 for 3 years and have
a salvage value of $3000. The company's required rate of return is 10%. The company uses straight-line depreciation.
Year
1
2
3
Present Value PV of an Annuity
of 1 at 10%
0.909
0.826
0.751
This project is
of 1 at 10%
0.909
1.736
2.487
unacceptable because it has a negative NPV.
acceptable because it has a positive NPV.
unacceptable because it earns a rate less than 10%.
acceptable because it has a zero NPV.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education