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Perez Electronics is considering investing in manufacturing equipment expected to cost $310,000. The equipment has an estimated useful life of four years and a salvage value of $18,000. It is expected to produce incremental cash revenues of $155,000 per year. Perez has an effective income tax rate of 40 percent and a desired rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Perez uses straight- line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Perez uses double- declining-balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Perez uses straight-line depreciation. e. Determine the payback period and unadjusted rate of return (use average investment), assuming that Perez uses double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.) Complete this question by entering your answers in the tabs below. Req A and B Req D and E Determine the net present value and the present value index of the investment, assuming that Perez uses straight-line depreciation and double-declining-balance for financial and income tax reporting. (Round your answers for "Net present valu to the nearest whole dollar amount and your answers for "Present value index" to 2 decimal places.) Net Present Value Present Value Index a. Straight-line method b. Double-declining-balance method

Perez Electronics is considering investing in manufacturing equipment expected to cost $310,000. The equipment has an estimated useful life of four years and a salvage value of $18,000. It is expected to produce incremental cash revenues of $155,000 per year. Perez has an effective income tax rate of 40 percent and a desired rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Perez uses straight- line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Perez uses double- declining-balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Perez uses straight-line depreciation. e. Determine the payback period and unadjusted rate of return (use average investment), assuming that Perez uses double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.) Complete this question by entering your answers in the tabs below. Req A and B Req D and E Determine the net present value and the present value index of the investment, assuming that Perez uses straight-line depreciation and double-declining-balance for financial and income tax reporting. (Round your answers for "Net present valu to the nearest whole dollar amount and your answers for "Present value index" to 2 decimal places.) Net Present Value Present Value Index a. Straight-line method b. Double-declining-balance method

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...
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Perez Electronics is considering investing in manufacturing equipment expected to cost $310,000. The equipment has an estimated useful life of four years and a salvage value of $18,000. It is expected to produce incremental cash revenues of $155,000 per year. Perez has an effective income tax rate of 40 percent and a desired rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Perez uses straight- line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Perez uses double- declining-balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Perez uses straight-line depreciation. e. Determine the payback period and unadjusted rate of return (use average investment), assuming that Perez uses double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.) Complete this question by entering your answers in the tabs below. Req A and B Req D and E Determine the net present value and the present value index of the investment, assuming that Perez uses straight-line depreciation and double-declining-balance for financial and income tax reporting. (Round your answers for "Net present valu to the nearest whole dollar amount and your answers for "Present value index" to 2 decimal places.) Net Present Value Present Value Index a. Straight-line method b. Double-declining-balance method <Req A and B Req D and E >
Transcribed Image Text:Perez Electronics is considering investing in manufacturing equipment expected to cost $310,000. The equipment has an estimated useful life of four years and a salvage value of $18,000. It is expected to produce incremental cash revenues of $155,000 per year. Perez has an effective income tax rate of 40 percent and a desired rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Perez uses straight- line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Perez uses double- declining-balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Perez uses straight-line depreciation. e. Determine the payback period and unadjusted rate of return (use average investment), assuming that Perez uses double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.) Complete this question by entering your answers in the tabs below. Req A and B Req D and E Determine the net present value and the present value index of the investment, assuming that Perez uses straight-line depreciation and double-declining-balance for financial and income tax reporting. (Round your answers for "Net present valu to the nearest whole dollar amount and your answers for "Present value index" to 2 decimal places.) Net Present Value Present Value Index a. Straight-line method b. Double-declining-balance method <Req A and B Req D and E >
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