TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $77,000 before income taxes. The machine costs $230,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 40% income tax rate, and has an after-tax hurdle rate of 10%. Year 1 2 3 4 FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity at 10% at 10% 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.000 2.100 3.310 4.641 6.105 7.716 A. Rate of return B. Net present value 10% 0.909 0.826 0.751 0.683 0.621 8.564 Required: A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value. Note: For all requirements, do not round intermediate calculations. Round final answers to whole number. Answer is complete but not entirely correct. 14,899 0.989 1.736 2.487 3.170 3.791 4.355
TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $77,000 before income taxes. The machine costs $230,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 40% income tax rate, and has an after-tax hurdle rate of 10%. Year 1 2 3 4 FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity at 10% at 10% 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.000 2.100 3.310 4.641 6.105 7.716 A. Rate of return B. Net present value 10% 0.909 0.826 0.751 0.683 0.621 8.564 Required: A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value. Note: For all requirements, do not round intermediate calculations. Round final answers to whole number. Answer is complete but not entirely correct. 14,899 0.989 1.736 2.487 3.170 3.791 4.355
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
Rahul

Transcribed Image Text:TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of...
Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating
costs of $77,000 before income taxes. The machine costs $230,000, has a useful life of five years, and no salvage value. Tanner uses
straight-line depreciation on all assets, is subject to a 40% income tax rate, and has an after-tax hurdle rate of 10%.
Year
1
2
3
4
FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity
at 10%
at 10%
10%
1.100
1.210
1.331
1.464
1.611
1.772
1.000
2.100
3.310
4.641
6.105
7.716
A. Rate of return
B. Net present value
10%
0.909
0.826
0.751
14,899
0.683
0.621
0.564
Answer is complete but not entirely correct.
86 %
0.909
1.736
Required:
A. Compute the machine's accounting rate of return on the initial investment.
B. Compute the machine's net present value.
Note: For all requirements, do not round intermediate calculations. Round final answers to whole number.
2.487
3.170
3.791
4.355
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