Please solve this accounting problem not use ai The Jackson Company has invested in a machine that cost $50,000, thathas a useful life of eight years, and that has no salvage value at the endof its useful life. The machine is being depreciated by the straight-linemethod, based on its useful life. It will have a payback period of fiveyears. Given these data, the simple rate of return on the machine isclosest to: (Ignore income taxes in this problem.)a. 3.9%b. 5.0%c. 7.5%d. 32.5%

Step 1: Define Simple Rate of ReturnThe simple rate of return is calculated by dividing the…

Answered: The Jackson Company has invested in a…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 4P: Although the Chen Company’s milling machine is old, it is still in relatively good working order and...

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Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?
Jark Corporation has invested in a machine that cost $77,000, that has a useful life of eleven years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of seven years. Given these data, the simple rate of return on the machine is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.) Multiple Choice 1.6% 2.7% 5.2% 23.4%
Jark Corporation has invested in a machine that cost $58,000, that has a useful life of five years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of four years. Given these data, the simple rate of return on the machine is closest to (Ignore income taxes.):
Dobson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income of $59,000. The equipment will have an initial cost of $507,000 and have an seven year life. There is no salvage value of the equipment. The hurdle rate is 14%. Ignore income taxes. a. Calculate accounting rate of return. (Round your answer to 2 decimal places.) Rate of Return b. Calculate payback period (Round your answer to one decimal place.) Years Payback Period
Ramson Corporation is considering purchasing a machine that would cost $609,580 and have a useful life of 9 years. The machine would reduce cash operating costs by $105,100 per year. The machine would have a salvage value of $107,340 at the end of the project. (Ignore income taxes.) Required: a. Compute the payback period for the machine. (Round your answer to 2 decimal places.) b. Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest whole dollar and your final answer to 2 decimal places.) a. Payback period 5.80 years b. Simple rate of return 8.09 %
Consider each part below independently. Ignore income taxes.1. Preston Company’s required rate of return is 14% on all investments. The company can purchase a new machine at a cost of $84,900. The new machine would generate cash inflows of $15,000 per year and have a 12-year useful life with no salvage value. Compute the machine’s net present value. Is the machine an acceptable investment? Explain.
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Newport Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $205,000. The equipment will have an initial cost of $950,000 and have a 6-year life. There is no salvage value for the equipment. If the hurdle rate is 7%, what is the approximate net present value? Ignore income taxes.
5. Suppose you are considering purchasing a machine or leasing one. The machine has a full economic life of 15 years, and is depreciated linearly to zero. There is no salvage value. For the same machine, you can buy it for $200,000, or lease it for $13,942 per year. Assume a tax rate of 27% and an after-tax cost of debt of 13%. Show work for all parts requiring computation. What is the after-tax lease payment (annual)? What is the depreciation tax shield (annual)? What is the incremental cash flow in absolute value (annual)? What is the net advantage to leasing? Should you lease or buy the machine? Why?
b. Cendrawasih Inc. is considering replacing the equipment it uses to produce crayons. The equipment would cost RM1.37 million, have a 12-year life, and lower manufacturing costs by an estimated RM304,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. Determine the net income from this proposed project.
The Valentine Company has decided to buy a machine costing $20,000. Estimated cash savings from using the new machine amount to $5,000 per year. The machine will have no salvage value at the end of its useful life of six years. The machine's internal rate of return is closest to: (Ignore income taxes.)a.11%b.12%c.13%d.14%
Jason Corporation has invested in a machine that cost $80,000, that has a useful life of eight years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of five years. Given these data, the simple rate of return on the machine is closest to: A. 6.8% B. 12% C. 7.5% D. 9%

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