Tiberius Manufacturing is considering two alternative investment proposals with the following data: Proposal X $10,800,000 Proposal Y $440,000 5 years $99,000 $35,000 Depreciation method Straight-line Required rate of return 14% 13% Calculate the accounting rate of return for Proposal Y. (Round any intermediate calculations and your final answer to two decimal places.) Investment Useful life Estimated annual net cash inflows for 5 years Residual value OA. 13.90 % OB. 11.56% OC. 17.83% OD. 7.58% 5 years $2,160,000 $60,000 Straight-line

Tiberius Manufacturing is considering two alternative investment proposals with the following data: Proposal X $10,800,000 Proposal Y $440,000 5 years $99,000 $35,000 Depreciation method Straight-line Required rate of return 14% 13% Calculate the accounting rate of return for Proposal Y. (Round any intermediate calculations and your final answer to two decimal places.) Investment Useful life Estimated annual net cash inflows for 5 years Residual value OA. 13.90 % OB. 11.56% OC. 17.83% OD. 7.58% 5 years $2,160,000 $60,000 Straight-line

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Juniper Corporation is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $810,000 $466,000 Useful life 8 years 8 years Estimated annual net cash inflows for 8 years $130,000 $70,000 Residual value $58,000 $− Depreciation method Straight−line Straight−line Required rate of return 13% 10% What is the accounting rate of return for Proposal X? (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.)
Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $368,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $46,000. The company's minimum desired rate of return for net present value analysis is 15%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place: b.…
Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $568,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $71,000. The company's minimum desired rate of return for net present value analysis is 10%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place.fill in…
Capital Investment Analysis: Spanish Peaks Railroad Inc
A company is investigating two production options of the manufactured switches that have the estimated cash flows shown. Which orne should be selected on the basis of a present worth analysis at 10% per year? In-house Contract First cost, P Annual cost, P per year Annual income, P per year 3,000,000 400,000 1,400,000 200,000 0: 200,000 3,100,000 Salvage value, P Life, years 5
The following data relates to an investment proposal: Investment in equipment Net annual cash inflow $32,000 5,000 expected Working capital required Salvage value of equipment Life of the project 8,000 2,000 10 years Working capital will be recovered at the end of the project's life. Using an 6% discount rate, the net present value of the project is closest to: $10,380 ($2,084) None of the other answers are correct $5,916 $2,380
Net present value—unequal lives Project 1 requires an original investment of $375,000. The project will yield cash flows of $90,000 per year for 8 years. Project 2 has a computed net present value of $50,000 over a 6-year life. Project 1 could be sold at the end of 6 years for a price of $40,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3…
Average Rate of Return, Cash Payback Period, Net Present Value Method Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $448,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $56,000. The company’s minimum desired rate of return for net present value analysis is 15%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, assuming the annual earnings are equal to the net cash flows less the annual depreciation expense on the equipment. If required, round your answer…
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:
OF CO Cum Oriole Company is considering two capital investment proposals. Estimates regarding each project are provided below: Initial investment Annual net income Net annual cash inflow Estimated useful life Salvage value Periods 5 Project Soup $400000 48000 124000 5 years 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 10% 12% 9% 62%. 12.0%, 24% Ⓒ31,0% 11% 3.89 3.791 3.696 3.605 4.486 4.355 4.231 4.111 The annual rate of return for Project Soup is Project Nuts $600000 64000 155000 6 years 0
For the cash flows below, use an annual worth comparison to determine which alternative is best at an interest rate of 1% per month.
Question Completion Status: The XYZ Company is considering investing in two alternative projects: Project 1 W $400,000 5 B. C. D. Investment Useful life (years) Estimated annual net cash inflows for useful life Residual value Depreciation method Required rate of return What is the payback period for Project 2? 16.00 years 4.00 years 5.00 years 4.70 years $100,000 $25,000 Straight- line 12% Project 2 $250,000 6 $50,000 $15,000 Straight- line 8%