!Required information[The following information applies to the questions displayed below.]Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses.The games would cost a total of $385,000, have a fifteen-year useful life, and have a total salvage value of $38,500. Thecompany estimates that annual revenues and expenses associated with the games would be as follows:RevenuesLess operating expenses:$ 280,000Commissions to amusement housesInsurance$ 80,00053,000DepreciationMaintenance23,10070,000226,100Net operating income$ 53,9002a. Compute the simple rate of return promised by the games.2b. If the company requires a simple rate of return of at least 12%, will the games be purchased?Complete this question by entering your answers in the tabs below.Req 2AReq 2BCompute the simple rate of return promised by the games. (Round your answer to 1 decimal place. i.e. 0.123 should beconsidered as 12.3%.)Simple rate of return%< Req 2AReq 2B >

2a. To calculate for the simple rate of return, the formula isSimple rate of return = Net operating…

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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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B2b Co. Is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $360,000 and hasa 12-year life and no salvage value. The expected annual income for each year from thos equipment follows. Compute the (a) annual net cash flow, (b) payback period, and (c) accounting rate of return for this equipment. $225,000 ,120,000, 30,000, 38,250, Income 36,750?
Finance KADS, Inc. has spent $440,000 on research to develop a new computer game. The firm is planning to spend $240,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $54,000. The machine has an expected life of three years, a $79,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $640,000 per year, with costs of
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A company plans to purchase a computer network control (CNC) machine for $650,000.00. If the company makes a profit from the products of the machine of $265,000.00 at years three and four and the company will be able to sell the machine at year four for $125,000.00 ( salvage value). The company wants to know if they will be able to recover the cost of the machine if the interest rate is 4% ? Provide them with the future value of the transactions to answer their question (if the number is negative it will not pay back, if it is positive it will). SOLVE IN EXCEL
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[The following information applies to the questions displayed below.] Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income Exercise 12-8 Part 2 (Algo) Complete this question by entering your answers in the tabs below. Req 2A $ 90,000 58,000 18,600 70,000 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 13%, will the games be purchased? Req 2B
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $151,640, including freight and installation, Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Required: 1. What is the machine's internal rate of return? Note: Round your answer to the nearest whole percentage.
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $240,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product $ 150,000 Expenses Materials, labor, and overhead (except depreciation) 80,000 Depreciation—Equipment 20,000 Selling, general, and administrative expenses 15,000 Income $ 35,000 (a) Compute the annual net cash flow.(b) Compute the payback period.(c) Compute the accounting rate of return for this equipment.
KADS, Inc. has spent $300,000 on research to develop a new computer game. The firm is planning to spend $100,000 on a machine to produce the new game. Shipping and Installation costs of the machine will be capitalized and depreciated; they total $40,000. The machine has an expected life of three years, a $65,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $500,000 per year, with costs of $150,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 13 percent, and it expects net working capital to Increase by $50,000 at the beginning of the project. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Year FCF (190,000 00)
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