Pina Colada Co. purchased equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(900). Annual cost savings were: $10000 for year 1: $8000 for year 2; and $6000 for year 3. The amount of the initial investment was Present Value PV of an Annuity Year of 1 at 12% of 1 at 12% 0.893 0.893 2 3 0.797 1.690 0.712 2.402 O $18678. O $20116. O $20478. O $18316. SU

Pina Colada Co. purchased equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(900). Annual cost savings were: $10000 for year 1: $8000 for year 2; and $6000 for year 3. The amount of the initial investment was Present Value PV of an Annuity Year of 1 at 12% of 1 at 12% 0.893 0.893 2 3 0.797 1.690 0.712 2.402 O $18678. O $20116. O $20478. O $18316. SU

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 3MC: Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of...

See similar textbooks

Similar questions

Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
Vishnu
Monroe Corporation is considering the purchase of new equipment. The equipment will cost $42,000 today. However, due to its greater operating capacity, Monroe expects the new equipment to earn additional revenues of $6,750 by the end of each year for the next 10 years. 1-a. Assuming a discount rate of 9% compounded annually, calculate the present value of annuity. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Consider an asset with upfront cost of $32,639. The cost associated with it during the first year of operation is $3,415. The cost associated with it during the second year of operation is $12,099. With an interest rate of 0.08, what is a levelized cost payment payable at the end of years 1 and 2, which has the same present value as the actual cost stream at the end of period 0. The annuity formula for an interest rate of 0.08 and t payments is given by 0+ 2)-(¹-0)
The loan payment (principal plus interest) is $4,475 per year. The present value interest factor for a 5-year annuity at 15%: $15,000 / 3.3522. The $5,000 salvage value is a reduction to the cost of owning and results in an after tax cost of owning the equipment of $5,197. EXERCISE 14: PURCHASE VERSUS LEASE CALCULATION Hull Manufacturing Co. must decide whether to purchase or lease a new piece of equipment. The equipment can be leased for $4,000 a year or purchased for $15,000. The lease includes maintenance and service. The salvage value of the equipment at the end of five years is $5,000. If the equipment is owned, service and maintenance charges (a tax-deductible cost) would be $900 a year. The firm can borrow the entire amount at a rate of 15% if they buy. The tax rate is 50%. Which method of financing would you choose? Use the following capital cost allowance amounts. Year Amount 1 $4,500 3,150 2,205 1,543 1,081 3 4 5
Which of the following is the approximate internal rate of return for an investment that costs $33,550 and provides a $5,000 annuity for 10 years? A) 5% B) 6% C) 8% D) 10%
Payback Company is considering the purchase of a copier machine for P42,825. The copier machine will be expected to be economically productive for 4 years. The salvage value at the end of 4 years is negligible. The machine is expected to provide a 15% internal rate of return. The company is subject to 40% income tax rate. The present value of an ordinary annuity of 1 for 4 periods is 2.85498. In order to realize the IRR of 15%, how much is the estimated before-tax cash inflow to be provided by the machine? A. P17,860 C. P25,000 B. P15,000 D. P35,700 Please show solution
A company decides to borrow $100 000 at j1 = 12% in order to finance a new equipment purchase. One of the conditions of the loan is that the company must make annual payments into a sinking fund (the sinking fund will be used to pay off the loan at the end of 20 years). The sinking-fund investment will earn j1 = 6%. (Do not round intermediate calculations. Round your answers to 2 decimal places.) a) What is the amount of each sinking-fund payment if they are all to be equal? Amount of each sinking-fund 2$ b) What is the total annual cost of the loan? Total annual cost c) What overall annual effective compound interest rate is the company paying to borrow the $100 000 when account is taken of the sinking-fund requirement? Compound interest rate %
Fill in the table below when P= $9,000, S= $3,000 (at the end of four years), and i = 12% per year. What is the equivalent uniform CR? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. Complete the accompanying table. (Round to the nearest dollar.) Loss in Value Capital Recovery Amount for Year Investment Opportunity Cost of Interest of Asset at Beginning of Year $9,000 During Year $2,500 Year (=12%) 2 1,500 3 1,500 4. The equivalent uniform CR is (Round to the nearest cent.)
JG Asset Services is recommending that you invest $1,050 in a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures? a. $1,247.07 b. $1,274.67 c. $1,283.87 d. $1,265.47 e. $1,256.27
General Computers Inc. purchased a computer server for $54,000. It paid 40.00% of the value as a down payment and received a loan for the balance at 4.50% compounded semi-annually. It made payments of $2,800.81 at the end of every quarter to settle the loan. a. How many payments are required to settle the loan? 0 payments Round up to the next payment b. Fill in the partial amortization schedule for the loan, rounding your answers to two decimal places.
A $3,000,000 apartment complex loan is to be paid off in 10 years by making 10 equal annual payments. How much is each payment if the interest rate is 7.5% compounded annually? (a) State the type. A. present valueB.sinking fund C.present value of an annuityD.amortizationE.ordinary annuity (b) Answer the question. (Round your answer to the nearest cent.)