Quary Company is considering an investment in machinery with the following information. The company's required rate of return is15% (PV of $1. EV of $1, PVA of $1, and FVA of $1)Note: Use appropriate factor(s) from the tables provided.Initial investment$ 288,000Useful lifeMaterials, labor, and overhead (except depreciation)9 years Depreciation-Machinery$ 54,00028,800Salvage valueExpected sales per year$ 28,80010,000 unitsSelling, general, and administrative expensesSelling price per unit14,000$ 14a. Compute the investment's net present value.b. Using the answer from part a, is the investment's internal rate of return higher or lower than 15% ? Hint: It is not necessary tocompute the IRR to answer this question.Complete this question by entering your answers in the tabs below.Required ARequired BCompute the investment's net present value.Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals.Round your answers to the nearest whole dollar.Years 1-9Year 9 salvageTotalsNet Cash FlowsPresent Value of NetxPresent Value=Cash Flows$

The problem involves the determination of the NPV and the IRR. NPV or Net Present Value is the…

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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Quary Company is considering an investment in machinery with the following information. Initial investment Useful life Salvage value Expected sales per year (a) Compute the investment's annual income and annual net cash flow. (b) Compute the investment's payback period. Required A Required B Complete this question by entering your answers in the tabs below. $ 335,000 9 years $ 20,000 16,750 units Annual Amounts Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Selling price per unit Compute the investment's annual income and annual net cash flow. Expenses Income Net cash flow $ 75,375 35,000 8,375 $ 10
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $129,500. Project 2 requires an initial investment of $95,40Q. Assume the company requires a 10% rate of return on its investments. Annual Anounts Sales of new product Expenses Haterials, labor, and overhead (except dapreciation) Depreciation-Machinery Selling, general, and administrative expenses Project 2 $ 81,000 Project 1 $ 103,500 68,900 18,500 ,480 33,920 19,080 21,200 $ 6,800 Income $7,620 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Present Value Net Cash Flowsx of Annulty at 10% Present Value of Net Cash Flows Project 1 Years 1-7 Net present value Present Value of Annulty at 10% Project 2 Present Value of Net Cash Flows Net…
Quary Company is considering an investment in machinery with the following information. Initial investment Useful life Materials, labor, and overhead (except depreciation) Depreciation-Machinery $ 254,000 9 years Salvage value Expected sales per year $ 20,000 12,700 units Selling, general, and administrative expenses Selling price per unit $ 57,150 26,000 6,350 $ 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 B Compute the investment's annual income and annual net cash flow. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Selling, general, and administrative expenses Depreciation-Machinery Income Net cash flow Income Cash Flow $ 127,000 (57,150) (6,350) (26,000) $ 89,500 $ 127,000
am.133.
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $491,000 cost with an expected four-year life and a $20,000 salvage value Additional annual information for this new product line follows PV of $. EX of St. PVA of Stand EVA of $ (Use appropriate factors) from the tables provided) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year 3. Compute net present value for this machine using a discount rate of 7% Complete this question by entering your answers in the tabs below. Required 1 Required 2 year 4 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.…
Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Gross investment Less: Accumulated depreciation Net investment AAR Year 0 Year 1 Year 2 Year 3 Year 4 $ 58,000 $58,000 $ 58,000 $ 58,000 $58,000 0 14,500 29,000 43,500 58,000 +% $ 58,000 $43,500 $ 29,000 $14,500 $ The machine generates, on average, $6,000 per year in additional net income. What is the average accounting return for this machine? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 0
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Laurman, Inc. is considering the following project: Required investment in equipment Project life Salvage value The project would provide net operating income each year as follows: Sales Variable expenses Contribution margin Fixed expenses: $2,205,000 7 225,000 $2,750,000 1,600,000 $1,150,000 Salaries, rent and other fixed out-of pocket costs Depreciation Total fixed expenses Net operating income. Company discount rate Required: $520,000 350,000 870,000 $280.000 18% (Use cells A4 to C18 from the given information, as well as 824, and A30 to D45 to complete this question. Negative amounts or amounts to be deducted should be input as negative values and will display in parentheses.) 1. Compute the annual net cash inflow from the project. 2. Complete the table to compute the net present value of the investment. $630,000 nitial investment „Annual cost savings Salvage value of the new machine Total cash flows Discount factor Present value of the cash flows Net present value Use Excel's PV…
Required information A project has a first cost of $670,000, a salvage value of 27% of the first cost after 3 years, and annual (GI-OE) of $275,000. Assume the company has a Te of 37%. Determine the approximate after-tax rate of return (ROR). The after-tax rate of return (ROR) is determined to be
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Radubhai
our firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Purchase Date Year 1 Year 2 Year 3 Year 4 Gross investment $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 Less: Accumulated depreciation 0 13,750 27,500 41,250 55,000 Net investment $ 55,000 $ 41,250 $ 27,500 $ 13,750 $ 0 The machine generates, on average, $5,300 per year in additional net income. What is the average accounting return for this machine? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) AAR %

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