Provide answer the financial accounting question 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

Step 1: Define Rate of ReturnThe rate of return shows the average net income as a percentage of…

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...

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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 C $-50000 $-9000 $-700 $6000 10 The present worth of alternative C is $ (Click to select) offers the lower present worth. D $-28000 $-5000 $-900 $700 5 and that of alternative D is $
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?
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Larkspur company is considering buying equipment for $360,000 with useful life of 5 year and. Financial accounting
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.
(b) Suppose that the allocation of a natural resource during three years results in a stream of total surplus value of $100 per period t (i.e.: t = 0; 1; 2). Obtain the present value of this stream when the discount rate is r = 0:10 and also when it is r = 0:05. Annuity amount (A) = $100 Time Period (n) = 3 years Discount rate (r) = 10% or 0.10 & 5% or 0.05 Present value of this stream when the discount rate is 10%: PVA = PV = A (P/A, r, n) PV = 100 (P/A, 0.10, 3) PV = 248.69 Present value of this stream when the discount rate is 5%: PVA = PV = A (P/A, r, n) PV = 100 (P/A, 0.5, 3) PV = 272.3 (c) Alternatively, the resource could be fully extracted now (say, in the period t = 0), resulting in a total surplus $280 at t = 0 and 0 in every future period. Is this immediate extraction strategy preferred to the extraction strategy described in (a) when r = 0:10? What about when r = 0:05? What does this tell us about the intuitive meaning of discounting regarding intertemporal…
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.
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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