Nelson Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net cash flow of $147,750. The equipment will have an initial cost of $500,000 and have a 5-year useful life, if the salvage value of the equipment is estimated to be $130,000, what is the accounting rate of return? Multiple Choice O O O 12.25% 14.75% 29.55% 31.22%

Nelson Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net cash flow of $147,750. The equipment will have an initial cost of $500,000 and have a 5-year useful life, if the salvage value of the equipment is estimated to be $130,000, what is the accounting rate of return? Multiple Choice O O O 12.25% 14.75% 29.55% 31.22%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Concord is contemplating a capital project costing $32838. The project will provide annual cost…

A: Net present value is the difference between the present value of the initial cash outflow and the…

Q: Terminal cash flow: Various lives and sale prices Looner Industries is currently analyzing the…

A: Terminal cash flow represents the end of the project cash flow which is determined by disposal of…

Q: Your answer is partially correct. Crane Company is considering a long-term investment project called…

A: Capital budgeting refers to the method which is helpful in decision-making the investors by…

Q: Halcyon Lines Inc. is considering purchasing a new ship for $8 million now. The forecasted cash…

A: Initial cost-$8,000,000Cash inflow$1,000,000Cost in 5th and 10th years-$2,000,000Salvage…

Q: A project requires a $2,930,000 initial investment for new machinery with a five-year life and a…

A: Accounting rate of return is calculated by dividing the Annual income by the Average investment.

Q: 4 Mountain Frost is considering a new project with an initial cost of $270,000. The equipment will…

A: A method of capital budgeting that provides information regarding the percentage of return of the…

Q: Terminal cash flow: Replacement decision Russell Industries is considering replacing a fully…

A: Depreciation is an accounting technique for distributing a tangible or fixed asset's cost over its…

Q: Newport Corporation is considering the purchase of a new piece of equipment. The cost savings from…

A: Cash Flow = cf = $210,000Initial Cost = i = $890,000Time = t = 6 YearsCost of Capital = r = 9%

Q: Get the Correct option with calculation and explanation

A: The problem requires the determination of the after-tax cash flows of the sale of machinery. In…

Q: The management of Kunkel Company is considering the purchase of a $44,000 machine that would reduce…

A: Net present value is the present value of cash flow minus initial investment.

Q: Excellent Yachting is considering acquiring Turquoise Tours. Management believes Turquoise Tours can…

A: Present value is a current value of future value which is received in near future at specified…

Q: Assume that a company is considering purchasing a new piece of equipment for $240,000 that would…

A: Simple rate of return is calculated by dividing the Net operating income by the initial investment.…

Q: i need solution. i.5

A: The objective of the question is to calculate the equivalent annual cost of the project. This…

Q: Lara Technologies is considering a cash outlay of $210,000 for the purchase of land, which it could…

A: Opportunity cost is the value forego by not choosing that option. Opportunity cost is cost incurred…

Q: Compute the net present value of each project. (Enter negative amounts using either a negative sign…

A: Payback period is the time period it takes for company to recover the amount invested in the…

Q: The Post Company is considering investing in two alternative projects: Investment Useful life…

A: Depreciation is the decrement in the value of tangible assets by the wear and tear during the…

Q: Question 3: Your Company is considering to choose one of the two projects: Project A and Project B.…

A: Excel Spreadsheet:

Q: ni.3 Nevland Corporation is considering the purchase of a machine that would cost $120, 000 and…

A: The problem is asking us to calculate the net present value (NPV) of a proposed investment project.…

Q: The management of Kunkel Company is considering the purchase of a $40,000 machine that would reduce…

A: The tool that is widely used for conducting capital budgeting process where a decision needs to be…

Q: Economics Margaret has a project with a £ 24,000 first cost that returns £ 4,900 per year over its…

A: Annual worth The difference between the costs and benefits a project incurs over its lifetime is…

Q: The management of Kunkel Company is considering the purchase of a $34,000 machine that would reduce…

A: Net Present Value It is the difference between Cash Outflow and Present Value Cashflow. NPV =…

Q: Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will…

A: Annual rate of return= Annual income/Average investment

Question

Nelson Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in
net cash flow of $147750. The equipment will have an initial cost of $500,000 and have a 5-year useful life, if the salvage value of the equipment is
estimated to be $130,000, what is the accounting rate of return?
Multiple Choice
O
12.25%
14.75%
29.55%
31.22%

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!

SEE SOLUTION Check out a sample Q&A here

Step 1: Computation of the amount of annual depreciation on purchase of new equipment:

VIEW

Step 2: Computation of the annual net income from the purchase of new equipment:

VIEW

Step 3: Computation of the Accounting rate of return:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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.

Similar questions

Belmont Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual A in net operating income of $210,000. The equipment will have an initial cost of $1,000,000 and an 8-year useful ife, if there is no salvage value of the equipment, what is the accounting rate of return? Multiple Choice O O 21.0% 16.0% O 42.0% O 13.5%
Your Company is interest in buying a new project that will last for 8 years. The projects internal rate of return is 5%. The project will generate annual operating cash inflows of $20,000. What is the most the company should pay for the equipment needed for this project? It will have no salvage value. Group of answer choices $128,000 $129,260 $13,540 $135,723 $122,797
The following present value factors are provided for use in this problem. Periods 1 2 3 4 Present Value of $1 at 8% 0.9259 0.8573 0.7938 0.7350 Xavier Co. wants to purchase a machine for $37,800 with a four year life and a $1,200 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $12,800 in each of the four years. What is the machine's net present value? Multiple Choice O O $4,595. $(5,477). $(4,595). Present Value of an Annuity of $1 at 8% 0.9259 1.7833 2.5771 3.3121 $43,277.
Alternative R has a first cost of $85,000, annual M&O costs of $60,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $55,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S that would yield a required incremental rate of return of 25.00% The M&O cost for alternative S is $
The management of Kunkel Company is considering the purchase of a $21,000 machine that would reduce operating costs by $5,000 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required rate of return is 12%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
A new project has an initial cost of $250,000. The equipment will be depreciated on a straight-line basis to a zero book value over the five-year life of the project. The projected net income each year is $13,250, $18,000, $20,240, $15,150, and $11,900, respectively. What is the average accounting return? Multiple Choice 11.52% 8.95% 13.46% 12.57% 5.33%
The cash flow of an energy management opportunity is estimated as follows: Initial cost:$12,000 Energy saving:$2,700/year for 12 years Maintenance cost:$1,200/year for 12 years Salvage value:$2,500@the end of 12 years If the interest rate is 10%, 1) What is the simple payback period (SPP) (in years)? (a)5.2 (b)4.2 (c)4.6 (d)8.02) With an annual discount rate is 10%, what is the discounted payback period (in years)? (a)9.5 b) 15.1 (c)8.1 (d) 16.9 (e) 6.53)With an annual discount rate is 10%, what is the benefit-cost ratio (BCR)? (Hint: Benefit = Annual saving-Maintenance; Cost= Initial investment - Salvage)(a) 1.04(b) 0.80(c) 1.25(d) 1.12(e) 1.43
_please help
Riordan Manufacturing is considering an investment in new equipment that will produce equal annual cash flows of $52,000 for 8 years and has a net present value of $94,182. The initial investment is $247,000, the useful life is 8 years, and the equipment's salvage value after 8 years is $26,000. What is the equipment's profitability index? Round your answer to two decimal places. 6.56 1.38 4.75 1.81
Assume that a company is considering purchasing a machine for $50,500 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. The profitability index for this investment is closest to: Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice O 0.95. 1.01. 1.05. 1.11.
None
NOVA Company is considering a long-term investment project called STUDY. STUDY will require an investment of $125,190. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $79,000, and annual cash outflows would increase by $40,000. Compute the cash payback period. O 3.21 years O 1.23 years O 1.58 years O 4 years