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.
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 8P
Related questions
Question
Subject: accounting
![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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1d4559b7-32ee-431d-b856-210240e86126%2Fc96dd4ca-04cc-4ebd-86e2-3254fc009f91%2F9ma884s_processed.jpeg&w=3840&q=75)
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
![](/static/compass_v2/shared-icons/check-mark.png)
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
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![Fundamentals Of Financial Management, Concise Edi…](https://www.bartleby.com/isbn_cover_images/9781337902571/9781337902571_smallCoverImage.jpg)
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)