Vaughn Company is considering a capital investment of $378,400 in additional productive facilities. The new machinery is expected tohave a useful life of 6 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annualnet income and net annual cash flows are expected to be $18,920 and $86,000, respectively. Vaughn has an 7% cost of capital rate,which is the required rate of return on the investment.(a1)Compute the cash payback period. (Round answer to 2 decimal places, e.g. 2.25.)Your answer is correct.Cash payback period(a2)eTextbook and Media(b)Your answer is correct.Annual rate of returnCompute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 2.25%.)eTextbook and MediaYour answer is correct.4.4 yearsNet present value $10 %Attempts: 1 of 5 usedUsing the discounted cash flow technique, compute the net present value. (Round present value factor calculations to 5 decimalplaces, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71.)31,522.44Attempts: 1 of 5 used Vaughn was presented with a second capital investment that provided similar production facilities as the first one. Thisinvestment cost $405,000, has a useful life of 7 years with a salvage value of $14,000. Depreciation is by the straight-line method.During the life of the investment, annual net income and net annual cash flows are expected to be $26,397 and $81,000respectively. Vaughn's 7% cost of capital is also the required rate of return on the investment.Compute the cash payback period. (Round answer to O decimal places, e.g. 25.)Your answer is correct.Cash payback periodeTextbook and Media(c2)Your answer is correct.Compute the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.)Annual rate of return(C3)eTextbook and Media5 yearsNet present value12.60 %Attempts: 2 of 5 usedAttempts: 1 of 5 usedUsing the discounted cash flow technique, compute the net present value. (Round present value factor calculations to 5 decimalplaces, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71.)

Time value of money :— According to this concept, value of money in present day is greater than the…

Vaughn was presented with a second capital investment that provided similar production facilities as the first one. This investment cost $405,000, has a useful life of 7 years with a salvage value of $14,000. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $26,397 and $81,000 respectively. Vaughn's 7% cost of capital is also the required rate of return on the investment. Compute the cash payback period. (Round answer to O decimal places, e.g. 25.) Your answer is correct. Cash payback period eTextbook and Media (c2) Your answer is correct. Compute the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.) Annual rate of return (C3) eTextbook and Media 5 years Net present value 12.60 % Attempts: 2 of 5 used Attempts: 1 of 5 used Using the discounted cash flow technique, compute the net present value. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71.)

Vaughn was presented with a second capital investment that provided similar production facilities as the first one. This investment cost $405,000, has a useful life of 7 years with a salvage value of $14,000. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $26,397 and $81,000 respectively. Vaughn's 7% cost of capital is also the required rate of return on the investment. Compute the cash payback period. (Round answer to O decimal places, e.g. 25.) Your answer is correct. Cash payback period eTextbook and Media (c2) Your answer is correct. Compute the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.) Annual rate of return (C3) eTextbook and Media 5 years Net present value 12.60 % Attempts: 2 of 5 used Attempts: 1 of 5 used Using the discounted cash flow technique, compute the net present value. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71.)

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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The net investment of decision is P276,200 which includes P247,500 capitalizable cost of machine and P50,000 of additional net working capital. The machine has a useful life of 5 years and a salvage value of P27,500. The annual operating cash inflow and outflow from this decision is P140,000 and P60,000 respectively. Assume a tax rate of 40% and a cost of capital of 10%. Requirements: 1. Net present value of the investment decision 2. Profitability index of the investment decision
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Vaughn Company is considering a capital investment of $378,400 in additional productive facilities. The new machinery is expected to have a useful life of 6 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $18,920 and $86,000, respectively. Vaughn has an 7% cost of capital rate, which is the required rate of return on the investment. (a1) Compute the cash payback period. (Round answer to 2 decimal places, e.g. 2.25.) Your answer is correct. Cash payback period (a2) eTextbook and Media (b) Your answer is correct. Annual rate of return Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 2.25%.) eTextbook and Media 4.4 years Net present value $ 10 Attempts: 1 of 5 used % Attempts: 1 of 5 used Using the discounted cash flow technique, compute the net present value. (Round present value factor calculations to 5…
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