The management of Septak Corporation is investigating purchasing equipmentthat would increase sales revenues by $269,000 per year and cash operatingexpenses by $156,000 per year. The equipment would cost $294,000 and havea 6 year life with no salvage value. The simple rate of return on the investmentis closest to (Ignore income taxes.):O 16.7%O 38.4%23.8%O 21.8%

Return on Investment (ROI) is a financial performance metric used to evaluate the profitability of…

Answered: The management of Septak Corporation is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.
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Peng Company is considering buying a machine that will yield income of $2,400 and net cash flow of $16,000 per year for three years. The machine costs $48,900 and has an estimated $8,100 salvage value. Compute the accounting rate of return for this investment. Numerator: Accounting Rate of Return Denominator: = Accounting Rate of Return Accounting rate of return
A corporation is considering purchasing a machine that will save $150,000 per year before taxes. The cost of operating the machine (including maintenance) is $30,000 per year. The machine will be needed for five years, after which it will have a zero salvage value. MACRS depreciation will be used, assuming a three-year class life. The marginal income tax rate is 25%. If the firm wants 15% return on investment after taxes, how much can it afford to pay for this machine? If the firm wants 15% return on investment after taxes, it can afford to pay ?.
A construction company is deciding to undertake a project. The project is quite profitable as it will generate net cash inflows of $20 million per year for 5 years. However, it will cause pollution to the nearby residents. The company can mitigate this pollution by investing additional 10 million at Year 0 but legally it is not compulsory for it to do so. Undertaking this project would cost $60 million without mitigation. If the firm does invest in mitigation, the annual cash inflows would be $22 million. The risk adjusted WACC is 12%. Calulate the Payback with and without mitgationwhat is the discounted payback with and without mitigation?Should the project be undertaken? If so, should the firm do mitigation? (hint: discuss all the criterias you have calculated in earlier parts)How should the environmental effects be dealt with when this project is evaluated
A Builder company is deciding to undertake a project. The project is quite profitable as it will generate net cash inflows of $20 million per year for 5 years. However, it will cause pollution to the nearby residents. The company can mitigate this pollution by investing additional 10 million at Year 0 but legally it is not compulsory for it to do so. Undertaking this project would cost $60 million without mitigation. If the firm does invest in mitigation, the annual cash inflows would be $22 million. The risk adjusted weighted average cost of capital is 12%. Calculate the Net Present Value and IRR with and without mitigation. Should the project be undertaken? If so, should the firm do mitigation?
Dynamic is considering investing in a rooftop solar network to generate its own power. Any unused power will be sold back to the local utility company. Between cost savings and new revenues, the company expects to generate $1,460,000 per year in net cash inflows from the solar network installation. The solar network would cost $7.2 million and is expected to have a 18-year useful life with no residual value. Calculate (i) the internal rate of return (IRR) and (ii) the net present value (NPV) assuming the company uses a 13% hurdle rate. (i) Calculate the internal rate of return (IRR). Use technology to find this value. (Enter a percentage rounded to two decimal places, X.XX%.) The IRR is %.
A company is investing in a solar panel system to reduce its electricity costs. The system requires a cash payment of $125,374.60 today. The system is expected to generate net cash flows of $13,000 per year for the next 35 years. The investment has zero salvage value. The company requires an 8% return on its investments. Compute the net present value of this investment.
4
| Frontier Corp. is considering a new product that would require an after-tax investment of $1,400,000 at t = 0. If the new product is well received, then the project would produce after-tax cash flows of $650,000 at the end of each of the next 3 years (t = 1, 2, 3), but if the market did not like the product, then the cash flows would be only $100,000 per year. There is a 70% probability that the market will be good. Tsai Corp. could delay the project for a year while it conducted a test to determine if demand would be strong or weak. The project's cost and expected annual cash flows are the same whether the project is delayed or not; however, the timing of the cash flows would change. (There would be the same number of cash flows-only the cash flows would be extended out one extra year.) The project's WACC is 10%. What is the value of the project after considering the investment timing option? a. $108,226.89 b. $137,743.32 c. $167,259.75 d. $196,776.18 e. $216,453.79
Pharoah Company is considering a long-term investment project called ZIP. ZIP will require an investment of $123,338. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $82,500, and annual cash outflows would increase by $41,250. The company's required rate of return is 12%. Click here to view the factor table. Calculate the internal rate of return on this project. (Round answers to O decimal places, e.g. 15%.) Internal rate of return on this project is between Determine whether this project should be accepted? The project be accepted. % and %.
Trovato Corporation is considering a project that would require an investment of $68,000. No other cash outflows would be involved. The present value of the cash inflows would be $89,080. The profitability index of the project is closest to (Ignore income taxes.):

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