Yuan Inc. has a large piece of machinery, and management has determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the machine: • Net book value is $18 million. • The machine could be sold for $10 million less a 11% commission. • If the company was forced to sell immediately, the proceeds would likely be $8 million. • If the machine continues to be used in production, it is anticipated to generate $4 million of cash flows for the next five years. It would require annual maintenance costs of $300,000 a year. The equipment could be sold for $100,000 at the end of the five years. • Assume Yuan has a discount rate of 9%. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided. Round time value factor to 5 decimal places.) Required: Is the machine impaired? O Yes O O No If so what is the amount of the imnairment loss? (Enter ansvwer in whole dollars not in million

Yuan Inc. has a large piece of machinery, and management has determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the machine: • Net book value is $18 million. • The machine could be sold for $10 million less a 11% commission. • If the company was forced to sell immediately, the proceeds would likely be $8 million. • If the machine continues to be used in production, it is anticipated to generate $4 million of cash flows for the next five years. It would require annual maintenance costs of $300,000 a year. The equipment could be sold for $100,000 at the end of the five years. • Assume Yuan has a discount rate of 9%. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided. Round time value factor to 5 decimal places.) Required: Is the machine impaired? O Yes O O No If so what is the amount of the imnairment loss? (Enter ansvwer in whole dollars not in million

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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Brett Collins is reviewing his company's investment in a cement plant. The company paid $15.500,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The company's desired rate of return for present value computations is 10 percent. Expected and actual cash flows follow: (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Expected Actual Year 1 $3,380,000 2,700,000 Year 2 $4,950,000 3,060,000 Net present value (expected) Net present value (actual) Year 3 $4,580,000 4,900,000 Year 4 $5,040,000 Year 5 $4,250,000 3,860,000 3,530,000 Required a.&b. Compute the net present value of the expected and actual cash flows as of the beginning of the investment. Note: Negative amounts should be Indicated by a minus sign. Round your Intermediate calculations and final answers to the nearest whole dollar.
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Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $151,640, including freight and installation, Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Required: 1. What is the machine's internal rate of return? Note: Round your answer to the nearest whole percentage.