Multiple Choice$40,850$63,450$31,725$61,900$65,000 The following relates to a proposed equipment purchase:Cost$126,900Salvage value$ 3,100Estimated useful life4 yearsAnnual net cash flows$ 45,200Depreciation methodStraight-lineThe annual average investment amount used to calculate the accounting rate of return is:Multiple Choice$40,850$63,450$31,725$61,900

ARR (Accounting ROR) is a traditional method which is used to evaluate various projects. It doesn’t…

The following relates to a proposed equipment purchase: Cost $126,900 Salvage value Estimated useful life 3,100 4 years Annual net cash flows $ 45,200 Straight-line Depreciation method The annual average investment amount used to calculate the accounting rate of return is:

The following relates to a proposed equipment purchase: Cost $126,900 Salvage value Estimated useful life 3,100 4 years Annual net cash flows $ 45,200 Straight-line Depreciation method The annual average investment amount used to calculate the accounting rate of return is:

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

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4. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $2,400,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net operating working…
The following data pertain to an investment proposal (Ignore income taxes.): Cost of the investment $ 36,000 Annual cost savings $ 11,000 Estimated salvage value $ 4,000 Life of the project 5 years Discount rate 13% Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed investment is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Project A requires a $315,000 initial investment for new machinery with a five-year life and a salvage value of $35,500. Project A is expected to yield annual income of $23,900 per year and net cash flow of $78,750 per year for the next five years.Compute Project A’s accounting rate of return. *please help correct the answer
Explorer Company is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $28,800 Working capital 3,200 Operations (per year for 4 years): Cash receipts $20,000 Cash expenditures 8,800 Disinvestment: Salvage value of equipment $2,400 Recovery of working capital 3,200 Discount rate: 10 percent Additional information for interest rate of 10 percent and four time periods: Present value of $1 0.68301 Present value of an annuity of $1 3.16987 What is the net present value for the investment? Select one: a. $14,658 b. $35,503 c. $3,825 d. $7,327
Harris Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 160,000 $ 54,000 $ 11,000 O $67,000 O $160,516 O $516 O $(5,776) 4 15 per year years % Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
The amount of the average investment for a proposed investment of $132,000 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total income of $28,000 for the 4 years is
A machine costs $600,000 and is expected to yield an after-tax net income of $23,000 each year. Management predicts this machine has a 12-year service life and a $120,000 salvage value, and it uses straight-line depreciation. Compute this machine's accounting rate of return. Choose Numerator: 1 7 Accounting Rate of Return Choose Denominator:
A 5-year project is estimated to cost $700,000 and have no residual value. If the straight-line depreciation method is used and estimated total income is $231,000, determine the average rate of return giving effect to depreciation on the investment. Round your percentage answer to one decimal place (for example, a value of .1048 rounds to 10.5%).fill in the blank 1 %
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment Annual cash inflows Salvage value of equipment Life of the investment Required rate of return Multiple Choice The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided. The internal rate of return of the investment is closest to: O O O 27% 25% 23% $37,000 $ 8,800 $ 21% 0 15 years 10 %
The following data pertain to an investment proposal (Ignore income taxes.): Cost of the investment $ 35,000 Annual Income $ 12,000 Estimated salvage value $ 6,000 Life of the project 4 years Discount rate 10% The net present value of the proposed investment is closest to: Round to nearest dolla
Given the following information about a possible average-risk, new product investment, calculate the investment's net present value. Initial Cost Expected Life Salvage Value Annual Depreciation Incremental Annual Sales Incremental Annual Production Costs $200,000 10yrs 0 $20,000 $200,000 $110,000 Incremental Annual Selling & Admin Costs Tax Rate Expected Inventory Turnover (calculated as production costs / 4 times ending inventory) Average Collection Period Cost of Equity Cost of Debt Target Debt to Equity Ratio $20,000 50% 45 days 13% 8.5% 130% Hint: Assume the company is on a 360-day year. Net Operating Working Capital investment is only necessary at the onset of the project (year O), it is recalled in period 10. Please ignore the Accounts Payables and Accruals in the calculation of NOWC
The amount of the average investment for a proposed investment of $158,000 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total income of $23,700 for the 4 years is a.$23,700 b.$39,500 c.$79,000 d.$5,925

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