Sheridan Company is considering three capital expenditure projects. Relevant data for the projects are as follows.AnnualProject InvestmentIncomeLife ofProject22A$240,900$17,4006 years23A274,90020,9509 years24A283,90015,7007 yearsAnnual net income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project.Sheridan Company uses the straight-line method of depreciation.Click here to view PV table.(a)Determine the internal rate of return for each project. (Round answers O decimal places, eg. 13%. For calculation purposes, use 5 decimalplaces as displayed in the factor table provided.)ProjectInternal Rate ofReturn

Answered: Sheridan Company is considering three…

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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Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Project 22A (a) 23A 24A Project 22A (b) Annual Income $243,600 $17,130 23A Investment Click here to view the factor table. 24A 271,500 Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation. 280,600 20,700 15,700 Determine the internal rate of return for each project. (Round answers O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal Rate of Return % Life of Project % 6 years 9 years 7 years % If Iggy Company's required rate of return is 11%, which projects are acceptable?
Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Annual Life of Project Investment Income Project 22A $243,600 $17,130 6 years 2ЗА 271,500 20,700 9 years 24A 280,600 15,700 7 years Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation. Click here to view PV table. (a) Determine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal Rate of Project Return 22A % 23А % 24A % (b) If Iggy Company's required rate of return is 11%, which projects are acceptable?
A project has an initial cost of $72,000 and will produce positive net income for four years. The project will use straight-line depreciation over the life of the project. The average accounting return of this project can be computed as Multiple Choice a) (Sum of all net income/2)/($72,000/2) b) (Sum of all net income/4)/$72,000 c) ($72,000/4)/(Sum of all net income/4) d) ($72,000/2)/(Sum of all net income/2) e) (Sum of all net income/4)/($72,000/2)
Project A requires a $315,000 initial investment for new machinery with a five-year life and a salvage value of $35,500. Project A is expected to yield annual income of $23,900 per year and net cash flow of $78,750 per year for the next five years.Compute Project A’s accounting rate of return. *please help correct the answer
[The following information applies to the questions displayed below.] Project Y requires a $306,000 investment for new machinery with a five-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 $ 390,000 174,720 61,200 28,000 $ 126,080 2. Determine Project Y's payback period. Project Y Payback Period Numerator: 1 Denominator: = = Payback Period 0
A new project has an initial cost of $250,000. The equipment will be depreciated on a straight-line basis to a zero book value over the five-year life of the project. The projected net income each year is $13,250, $18,000, $20,240, $15,150, and $11,900, respectively. What is the average accounting return? Multiple Choice 11.52% 8.95% 13.46% 12.57% 5.33%
Sheridan Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $172,000 $190,000 $214,000 Annual net income: Year 1 15,120 19,440 29,160 2 15,120 18,360 24,840 3 15,120 17,280 22,680 4 15,120 12,960 14,040 5 15,120 9,720 12,960 Total $75,600 $77,760 $103,680 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table. (a) × Your answer is incorrect. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono 11.38 years Project Edge 9.77 years Project Clayton 7.34 years
Consider a capital expenditure project that has forecasted revenues equal to $32,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000, and the equipment’s estimated salvage value at the end of the project is $9,000. The equipment’s $23,000 cost will be depreciated on a straight-line basis to $0 over a 10-year estimated economic life. Assume that the project requires an initial $7,000 working capital investment. The company’s marginal tax rate is 30%. Calculate the project’s net present value using a 12% discount rate.
Garcìa Co. can invest in one of two alternative projects. Project Y requires a $360,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $360,000 initial investment for new machinery with a three-year life and no salvage value. The two projects yield the following annual results. Cash flows occur evenly within each year. Required 1. Compute each project's annual net cash flows. 2. Compute each project's payback period. If the company bases investment decisions solely on payback period, which project will it choose? 3. Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate of return, which project will it choose? 4. Compute each project's net present value using 8% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose?
Blossom Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Capital investment Annual net income: Total Year 1 2 32 S Project Bono $170,000 14,700 14,700 14,700 14,700 14,700 $73,500 Project Edge Project Clayton $185,000 $202,000 18,900 17,850 16,800 12,600 9,450 $75,600 28,350 24,150 22,050 13,650 12,600 $100,800 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table.
A potential project involves an initial investment in machinery of RO.1,000,000 and has the following cash inflows:Year 1 – RO.250,000Year 2 – RO.350,000Year 3 – RO.200,000Year 4 – RO.400,000At the end of year 4, the machinery will be sold for RO.600,000.Calculate the accounting rate of return based on average investment.NOTE (DEDUCT THE DEPRECIATION TO ARRIVE AT THE CORRECT AVERAGE PROFIT) a. None of the options b. 35% c. 20% d. 25% Clear my choice
The company is considering to invest in a project with following information: - The total investment of the project 2500 monetary unit. Cost of purchasing fixed assets is 2,350monetary unit, the rest of the capital to buy the net assets at the beginning of the second year. The funding for fixed assets in the early first year and the early second year, respectively is 1350 and 1000 monetary unit. - Straight line depreciation within 6 years of the project. When the project is finished, the liquidation assets is 50 monetary unit. - Net working assets are revoked when finished project. - When the project goes into operation period (from the second year), generating a revenue of 3, 500 monetary unit yearly, the variable costs are 500 per year, annual fixed costs excluding depreciation and interest 200 monetary unit - The corporate income tax rate is 25%. The discount rate of the project is 16% per year. The owners are considering to borrow money from banks to finance the project, namely to…

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