Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $74,000 before income taxes. The machine costs $260,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 35% income tax rate, and has an after-tax hurdle rate of 8%. Year 1 3556NH 2 4 FV of $1 at 8% 1.080 1.166 1.260 1.360 1.469 1.587 FV of an ordinary annuity at 8% 1.000 2.080 3.246 4.506 5.867 7.336 PV of $1 at 8% 0.926 0.857 0.794 0.735 0.681 0.630 PV of an ordinary annuity at 8% 0.926 1.783 2.577 3.312 3.993 4.623 Required: A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value.
Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $74,000 before income taxes. The machine costs $260,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 35% income tax rate, and has an after-tax hurdle rate of 8%. Year 1 3556NH 2 4 FV of $1 at 8% 1.080 1.166 1.260 1.360 1.469 1.587 FV of an ordinary annuity at 8% 1.000 2.080 3.246 4.506 5.867 7.336 PV of $1 at 8% 0.926 0.857 0.794 0.735 0.681 0.630 PV of an ordinary annuity at 8% 0.926 1.783 2.577 3.312 3.993 4.623 Required: A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Subject: accounting
Transcribed Image Text:Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating
costs of $74,000 before income taxes. The machine costs $260,000, has a useful life of five years, and no salvage value. Tanner uses
straight-line depreciation on all assets, is subject to a 35% income tax rate, and has an after-tax hurdle rate of 8%.
Year
ANMI6
1
2
3
4
5
FV of $1 at
8%
1.080
1.166
1.260
1.360
1.469
1.587
FV of an ordinary
annuity at 8%
1.000
2.080
3.246
4.506
5.867
7.336
PV of $1 at
8%
0.926
0.857
0.794
0.735
0.681
0.630
PV of an ordinary
annuity at 8%
0.926
1.783
2.577
3.312
3.993
4.623
Required:
A. Compute the machine's accounting rate of return on the initial investment.
B. Compute the machine's net present value.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education