Rooney Electronics is considering investing in manufacturing equipment expected to cost $330,000. The equipment has an estimated useful life of four years and a salvage value of $ 20,000. It is expected to produce incremental cash revenues of $165,000 per year. Rooney has an effective income tax rate of 30 percent and a desired rate of return of 14 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Rooney uses straight-line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Rooney uses double-declining- balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Rooney uses straight-line depreciation.

Rooney Electronics is considering investing in manufacturing equipment expected to cost $330,000. The equipment has an estimated useful life of four years and a salvage value of $ 20,000. It is expected to produce incremental cash revenues of $165,000 per year. Rooney has an effective income tax rate of 30 percent and a desired rate of return of 14 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Rooney uses straight-line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Rooney uses double-declining- balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Rooney uses straight-line depreciation.

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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