Quary Company is considering an investment in machinery with the following information.Initial investmentUseful lifeMaterials, labor, and overhead (except depreciation)Depreciation-Machinery$ 254,0009 yearsSalvage valueExpected sales per year$ 20,00012,700 unitsSelling, general, and administrative expensesSelling price per unit$ 57,15026,0006,350$ 10(a) Compute the investment's annual income and annual net cash flow.(b) Compute the investment's payback period.Answer is not complete.Complete this question by entering your answers in the tabs below.Required A Required BCompute the investment's annual income and annual net cash flow.Annual AmountsSales of new productExpensesMaterials, labor, and overhead (except depreciation)Selling, general, and administrative expensesDepreciation-MachineryIncomeNet cash flowIncomeCash Flow$127,000(57,150)(6,350)(26,000)$89,500$127,000< Required ARequired B >

Explanations for Quay Company Investment AnalysisThe previous response provided a breakdown of how…

Answered: Quary Company is considering an…

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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Andronicus Corporation has the following jumbled information about an investment proposal: Revenues in each of years 1-3 = $30,000 Year O initial investment = $50,000 Inventory level = $15,000 in year 1, $16,500 in year 2, and $10,000 in year 3 Production costs = $10,000 in each of years 1-3 Salvage value = $13,000 in year 4 Depreciation = 100% immediate bonus depreciation Tax rate=21% Customers pay with a 6-month lag Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 8%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business.
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Required information [The following information applies to the questions displayed below.] Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Choose Numerator: 1 1 Accounting Rate of Return Choose Denominator: G O
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $268,000. Project 2 requires an initial investment of $170,000. Annual Amounts Sales of new product Expenses Project 1 Project 2 $ 180,000 $160,000 Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $ 30,000 (a) Compute each project's annual net cash flow. (b) Compute payback period for each investment. Annual Amounts Income Sales of new product Project 1 Project 2 Cash Flow Income Cash Flow $180,000 $160,000 Expenses Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $30,000 Net cash flow $0 Payback Period Numerator: / Denominator: Project 1 Project 2 = Payback period = 0 = 0
Bridgeport Company is considering two capital expenditures. Relevant data for the projects are as follows: Project Initial investment Annual cash inflow Life of project Salvage value A $260,084 $46,590 Project A 7 years $0 Project B Click here to view the factor table. Bridgeport Company uses the straight-line method to depreciate its assets. B $278,237 Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.) $44,540 9 years $0 Internal rate of return % %
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Tipton Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment Annual cash inflows Salvage value of equipment Life of the investment Required rate of return O 5 years O 15 years O2 years O 7.143 years $ 30,000 $ 6,000 $0 Chapter 8 15 10 The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment is: years %
Andronicus Corporation (AC) has the following jumbled information about an investment proposal: Revenues in each of years 1–4 = $37,000 Year 0 initial investment = $57,000 Inventory level = $18,500 in year 1, $20,700 in year 2, and $13,500 in year 3 Production costs = $12,100 in each of years 1–4 Salvage value = $13,700 in year 4 Depreciation = 100% immediate bonus depreciation Tax rate = 21% There is an additional 6-month lag for all cash flows after year 0. For example, customers pay consistently with a 6-month lag, as AC does for production costs, taxes, etc. Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 10%, what is the project’s NPV? Assume that, if the project generates losses, those losses can be used to offset profits for tax purposes elsewhere in the business.
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The information below relates to the purchase of equipment: investment in the project: $10,000 Net annual cash inflows: 2,400 Working capital required: 5,000 Salvage value of the equipment: 1,000 Life of the project: 8 years At the completion of the project, the working capital will be released for use elsewhere. Compute the net present value of the project, using a discount rate of 10% $606 $8,271 ($1,729) $1,729

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