The Snacks Galore is looking to expand its business by adding a new line of vending machines. The management team is considering expanding into either soda machines or snack machines. Following is the relevant financial data relating to the decision: Soda Machines Snack Machines Investment $100,000 $150,000 Useful life (years) 5 10 Estimated annual net income generated over useful life $30,000 $18,000 Residual value $10,000 $5,000 Depreciation method straight-line straight-line Income tax rate 20% 20% Required rate of return 8% 12% The Snacks Galore is planning to fully depreciate the value of the investments. The net present value for the soda machines is nearest to which of the following amounts? Select one: a. $91,650 b. $97,095 c. $98,456 d. $105,080 e. $106,441
The Snacks Galore is looking to expand its business by adding a new line of vending machines. The management team is considering expanding into either soda machines or snack machines. Following is the relevant financial data relating to the decision: Soda Machines Snack Machines Investment $100,000 $150,000 Useful life (years) 5 10 Estimated annual net income generated over useful life $30,000 $18,000 Residual value $10,000 $5,000 Depreciation method straight-line straight-line Income tax rate 20% 20% Required rate of return 8% 12% The Snacks Galore is planning to fully depreciate the value of the investments. The net present value for the soda machines is nearest to which of the following amounts? Select one: a. $91,650 b. $97,095 c. $98,456 d. $105,080 e. $106,441
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The Snacks Galore is looking to expand its business by adding a new line of vending machines. The management team is considering expanding into either soda machines or snack machines. Following is the relevant financial data relating to the decision:
|
|
Soda Machines |
Snack Machines |
|
Investment |
$100,000 |
$150,000 |
|
Useful life (years) |
5 |
10 |
|
Estimated annual net income generated over useful life |
$30,000 |
$18,000 |
|
Residual value |
$10,000 |
$5,000 |
|
|
straight-line |
straight-line |
|
Income tax rate |
20% |
20% |
|
Required |
8% |
12% |
The Snacks Galore is planning to fully depreciate the value of the investments. The
Select one:
a. $91,650
b. $97,095
c. $98,456
d. $105,080
e. $106,441
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