Financial Accounting The anticipated purchase ofpurchase of a fixedasset for $400,000, with a useful lifeof 5 years and no residual value, isexpected to yield total net income of$300,000 for the 5 years. The expectedaverage rate of return is 30%.a. Trueb. False

Conclusion:The calculated Average Rate of Return (ARR) is 15%, not 30%. Therefore, the statement is…

Answered: The anticipated purchase of purchase of…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

See similar textbooks

Similar questions

1. A firm is considering two alternatives that have no salvage value. A Initial Cost $10,700 $5,500 Uniform Annual 2,100 1,800 Benefits Useful Life, in 8 4 years At the end of 4 years, another B may be purchased with the same cost, benefit and so forth. 1. Graph the EUAC or EUAW for the alternatives. Construct a choice table for interest rates from 0% to 100%. 2. If the MARR is 10%, which alternative should be selected?
Kk201. An asset produces $150 in two years, and $250 in four years, and the current price has been calculated toreflect a rate of return of 9% annually. Using the definition that convexity = second derivative of pricedivided by price, find the convexity of this asset evaluated at the annual yield rate of 9%.
Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of 15% per year and a study period of 10 years. Alternative C First Cost AOC, per Year Annual Increase in Operating Cost, per Year Salvage Value Life, Years $-50,000 $-9,000 $-28,000 $-5,000 $-700 $-900 $6,000 $700 10 The present worth of alternative C is $ and that of alternative D is $ Alternative D offers the lower present worth.
Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of 15.00% per year and a study period of 10 years. (Include a minus sign if necessary.) Alternative First Cost AOC, per Year Annual Increase in Operating Cost, per Year Salvage Value Life, Years The present worth of alternative C is $ с $-50000 $-6000 $-1500 $8000 10 D $-22000 $-8500 $-300 $1500 5 and that of alternative D is $ Alternative D offers the lower present worth.
7. Future values (S2.1) Compute the future value of a $100 investment for the following combinations of rates and times. = 6%, t = 10 years. b. r= 6%, t = 20 years. c. r = 4%, t = 10 years. d. r = 4%, t = 20 years. a. r =
Mike Derr Company expects to earn 6% per year on an investment that will pay $616,000 seven years from now. (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Compute the present value of this investment. Future Value Table Factor Present Value
An investment of $80,000 yields a net income of $10,000 per year. How many years does it toketo recover the initial investment ot nominol interest of 6.5% compounded quarterly? You canuse the spreadsheet functions to solve this question or trial and error procedurea. 16 b.12c.15d.14 e.11
Two mutually exclusive alternatives have the estimates shown below. Use annual worth analysis to determine which should be selected at an interest rate of 15% per year. Q R $-44,000 $-11,000 $3,000 $-84,000 $-6,000 in year 1, increasing by $1,000 per year thereafter $10,000 First Cost AOC per Year Salvage Value Life 2 years 4 years Alternative (Click to select) vshould be selected. (Click to select) Q
Given the following data, use present worth analysis to find the better alternative, A or B. Use an analysis period of 12 years and 12% annual interest rate. A B Initial cost 9,010 14,542 Annual benefit 5,627 9,399 Salvage value 1,247 -2,430 6 years 4 years Useful life What is the difference between the present worth of alternative B and A, specifically what is PWB-PWA? State your answer with 2 decimal places
An anticipated purchase of equipment for $520,000, with a useful life of 8 years and no residual value, is expected to yield the following annual net incomes and net cash flows: Year 1 2 3 4 5 6 7 8 Net Income $60,000 50,000 50,000 40,000 40,000 40,000 40,000 40,000 What is the cash payback period? Oa. a. 6 years Ob. 3 years Oc. 5 years Od. 4 years Net Cash Flow $120,000 110,000 110,000 100,000 80,000 80,000 60,000 60,000
Consider alternatives A and B as shown below. The interest rate is 9%. For parts a) and b), let X = $250. For parts a) and b), which alternative is preferred: a) by equivalent annual worth analysis? b) by payback period? c) Compute the value of X that makes the two alternatives equally desirable. Initial cost Uniform annual benefit Salvage value Useful life, in years A $500 200 100 5 B $900 X 120 5
Consider the following two investment alternatives. Determine the range of investment costs for Alternative B (i.e., min. value < X

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

SEE MORE TEXTBOOKS

The anticipated purchase of purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $300,000 for the 5 years. The expected average rate of return is 30%. a. True b. False