Required information Problem 24-2A (Algo) Payback period, accounting rate of return, net present value, and net cash flow calculation LO P1, P2, P3 [The following information applies to the questions displayed below] Project Y requires a $331,500 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within eath year. (PV of $1. FV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Problem 24-2A (Algo) Part 2 2. Determine Project Y's payback period. Project Y Numerator: initial investment $ Payback Period 1 331,500/ Denominator: Annual net cash flow Project Y $ 350,000 156,800 82,875 25,000 $ 85,325 Payback Period

Required information Problem 24-2A (Algo) Payback period, accounting rate of return, net present value, and net cash flow calculation LO P1, P2, P3 [The following information applies to the questions displayed below] Project Y requires a $331,500 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within eath year. (PV of $1. FV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Problem 24-2A (Algo) Part 2 2. Determine Project Y's payback period. Project Y Numerator: initial investment $ Payback Period 1 331,500/ Denominator: Annual net cash flow Project Y $ 350,000 156,800 82,875 25,000 $ 85,325 Payback Period

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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D1. Account
Spiritlight Ventures is considering the following investment: Investment $140,000 Annual revenues $ 96,000 Annual variable costs $ 32,000 Annual fixed out-of-pocket costs $ 20,000 Salvage value $ 12,000 Discount rate 12% Expected life of project 8 years Ignore income taxes. The present value of the annual cash flow (rounded) is a.$152,538. b.$136,822. c.$204,884. d.$218,592.
[The following information applies to the questions displayed below.} Project Y requires a $313,500 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 380,000 170, 240 78, 375 27,000 $ 104,385 3. Compute Project Y's accounting rate of return. Project Y Numerator: Accounting Rate of Return Denominator: Accounting Rate of Return 0
Expansion versus replacement cash flows Tesla Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These cash flows are summarized in the following table. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Project A Project B Initial investment −$4,646,000 $1,553,000* Year Operating cash flows 1 $562,000 $390,000 2 915,000 390,000 3 1,343,000 390,000 4 2,218,000 390,000 5 3,405,000 390,000 *After-tax cash inflow expected from liquidation. a. If Project A, which requires an initial investment of −$4,646,000, is a replacement for Project B and the $1,553,000 initial investment shown for Project B is the after-tax cash inflow expected from liquidating it, what would be the net cash flows for this replacement decision? b. How can an expansion decision such as project A be viewed as a special form of a…
Draw a 5-year cash flow diagram representing the following cash flows to build springs: (Chapter 2) Initial investment in plant and equipment $50K Answer: Annual maintenance: $3K after year 1 and increasing $1K per year after that Answer: Annual production costs – $10K/year Answer: Annual revenue - $25K/year Answer:
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Year 0 Cash Flow = +$25,000 (assume only 1 change in signs) Project IRR = 4.5% Project DR = 6.0% %3D Should the project be accepted without reviewing NPV? Why or why not? Explain
Payback Period and Accounting Rate of Return: Equal Annual Operating Cash Flows with Disinvestment Minn is considering an investment proposal with the following cash flows: Initial investment-depreciable assets $227,500 Net cash inflows from operations (per year for 10 years) 32,500 Disinvestment-depreciable assets 22,750 For parts b. and c., round answers to three decimal places, if applicable. a. Determine the payback period. 7 years b. Determine the accounting rate of return on initial investment. 5.495 c. Determine the accounting rate of return on average investment. 4.902
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.
Subject: acounting
Year 0 ($100,000)-Project Outlay (The bracket indicates a negative figure) Year 1 Year 2 Year 3 Year 4 Year 5 $ 18,000 $ 18,000 $18,000 $18,000 $ 18,000 Assume that cash flows are reinvested at the rate of 10%, compounded annually. Calculate the Modified Internal Rate of Return (MIRR) on this project. (Note that n=5) a 18.96% b 18% c 15.98% d 19.2%