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Assume Peng requires a 15% return on its investments. The following information applies to // Header code for stack // requesting to create source code The initial outlay of the project would be $800,000 and the project's assets would have a residual value of $50,000 at the end o. Yokam Company is considering two alternative projects. Compute the net present value of each potential investment. Currently, U.S. Treasury bills are yielding 6.75% and the expected return for the S & P 500 is 18.2%. The lease term is five years. The fair value of the equipment is $464,000. Investment required in equipment $530,000 ; Annual cash inflows $74,000 ; Salvage value $0 ; Li, Your company has been presented with an opportunity to invest in a project. The machine will cost $1,812,000 and is expected to produce a $203,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and a $23,000 salvage value. Strauss Corporation is making an $89,000 investment in equipment with a 5-year life. Let us assume straight line method of depreciation. Enter the email address you signed up with and we'll email you a reset link. We reviewed their content and use your feedback to keep the quality high. Assume the company uses straight-line . The security exceptions clause in the WTO legal framework has several sources. Accounting Rate of Return = Net Income / Average Investment. The investment has zero salvage value. The amount, to be invested, is $100,000. Assume all sales revenue is received, Elmdale Company is considering an investment that will return a lump sum of $769,700, 7 years from now. Management predicts this machine has a 8-year service life and a $100,000 salvage value, and it uses str, Carla Company owns equipment that cost $1,044,000 and has accumulated depreciation of $440,800. Apex Industries expects to earn $25 million in operating profit next year. An asset costs $70,000 and is expected to have a $10,000 salvage value at the end of its 10-year life. should purchase a used Caterpillar mini excavator, A) The distribution of exam scores for Statistics is normally What is the accounti, The Truncale Company is planning a $210,000 equipment investment that has an estimated five-year life with no estimated salvage value. A new operating system for an existing machine is expected to cost $, A machine costs $700,000 and is expected to yield an after-tax net income of $52,000 each year. a. A. Required intormation Use the following information for the Quick Study below. Compute the payback period. b) define symbols and develop mathematical model, how does a change in each variable affect demand. Peng Company is considering an investment expected to generate an average net income after taxes of $3,200 for three years. ROI is equal to turnover multiplied by earning as a percent of sales. During those years the company has been profitable, and it expects to continue to be profitable in the foreseeable future. Compute the net present value of this investment. See Answer. The company uses straight-line depreciation. Yokam Company is considering two alternative projects. 8. Compute this machine's accoun, A machine costs $500,000 and is expected to yield an after-tax net income of $15,000 each year. Year 0 ($400,000) initial investment Year 1 $140,000 Year 2 120,000 Year 3 100,000 Year 4 80,000, A company has a minimum required rate of return of 10%. Equity method b. Required: Prepare the, X Company is thinking about adding a new product line. The investment costs $54,900 and has an estimated $8,100 salvage value. Assume the company uses straight-line depreciation. What is the accounti, A company buys a machine for $70,000 that has an expected life of 6 years and no salvage value. Cash flow Assume the company uses straight-line depreciation. Projected annual cash flows are: Year 1 $500,000 Year 2 $600,000 Year 3 $700,000 Year 4 $400,000 Calculate the NPV and the IRR. What is the present value, Strauss Corporation is making a $71,900 investment in equipment with a 5-year life. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Melton Company's required rate of return on capital budgeting projects is 16%. The investment costs$45,000 and has an estimated $6,000 salvage value. What is the NPV of the investment, The Zinger Corporation is considering an investment that has the following data: Year 1 Year 2 Year 3 Year 4 Year 5 Investment $8,000 $3,000 Cash inflow $2,000 $2,000 $5,000 $4,000 $4,000 Cash inflows occur evenly throughout the year. Assume the company uses straight-line depreciation. The estimated cash inflow from the project are as follows: Year Cash Inflow Present value factor at 10% 1 70,000 0.909 2 80,000 0.826 3 120,000 0.751 4 90,000 0.683 5 60,000 0.621 Ca, A company is considering investment in a Flexible Manufacturing System. $40,000 Economic life 5 years Salvage value Zero Tax rate payable (assume paid in year of income) 30, A machine costs $500,000, has a $28,700 salvage value, is expected to last eight years, and will generate an after-tax income of $72,000 per year after straight-line depreciation. a. Compute this machines accounting rate of return. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Assume Peng requires a 15% return on its investments. The management predicts that this machine has a 10-year services life and a $100,000 salvage value, and, The Placque Company purchased an office building for $4,555,000. A company is deciding to invest in a new project at a cost of $2 million dollars. The asset is recorded at $810,000 and has an economic life of eight years. ), Summary of Strategic Management southern African concepts and case fourth edition, chapters 1 to 4, What of the following is not considered practice before the IRS per Circular 230? Compute the net present value of this investment. The average stock currently returns 15% and short-term treasury bills are offering 6%. TABLE B.4 f= [(1 + i)"-1Vi Future Value of an Annuity of 1 Rate Periods 1% 2% 3% 6% 7% 8% 9% 10% 12% 15% 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 0000 .0000 1.0000 10000 2.0100 2.0200 2.0300 2.0400 2.0500 2.0600 2.0700 2.0800 2.0900 2.1000 2.1200 3.0301 3.0604 3.0909 3.1216 3.1525 3.1836 3.2149 3.2464 3.2781 3.3100 3.3744 4.0604 4.1216 4.1836 4.2465 4.3101 4.3746 4.4399 5.1010 5.2040 5.3091 5.4163 5.5256 5.6371 5.7507 5.8666 5.9847 6.1051 6.3528 6.1520 6.3081 6.4684 6.6330 6.8019 6.9753 7.1533 7.3359 7.5233 7.7156 8.1152 7.2135 7.4343 7.6625 7.8983 8.1420 8.3938 8.6540 8.9228 9.2004 9.4872 10.0890 8.2857 8.5830 8.8923 9.2142 9.5491 9.8975 10.2598 10.6366 11.0285 11.4359 12.2997 9.3685 9.7546 10.1591 10.5828 11.0266 11.4913 11.9780 12.4876 13.0210 13.5795 14.7757 1.0000 2.1500 3.4725 4.9934 6.7424 8.7537 11.0668 4.5061 4.5731 4.6410 4.7793 16.7858 10 10.4622 10.9497 11.4639 12.0061 12.5779 13.1808 13.8164 14.4866 15.1929 15.9374 17.5487 20.3037 11.5668 12.1687 12.8078 13.4864 14.2068 14.9716 15.7836 16.6455 7.5603 18.5312 20.6546 24.3493 12.6825 13.4121 14.1920 15.0258 15.9171 16.8699 17.8885 18.9771 20.1407 21.3843 24.1331 12 13 13.8093 14.6803 15.6178 16.6268 17.7130 18.8821 20.1406 21.4953 22.9534 24.5227 28.0291 14 14.9474 15.9739 17.0863 18.2919 19.5986 21.0151 22.5505 24.2149 26.0192 27.9750 32.3926 40.5047 15 16 17.2579 18.6393 20.1569 21.8245 23.6575 25.6725 27.8881 30.3243 33.0034 35.9497 42.7533 55.7175 17 18.4304 20.0121 21.7616 23.6975 25.8404 28.2129 30.8402 33.7502 36.9737 40.5447 48.8837 65.0751 18 19 20.8109 22.8406 25.1169 27.6712 30.5390 33.7600 37.3790 41.4463 46.0185 51.1591 63.4397 88.2118 20 22.0190 24.2974 26.8704 29.7781 33.0660 36.7856 40.9955 45.7620 51.1601 57.2750 72.0524 102.4436 25 30 35 41.6603 49.9945 60.4621 73.6522 90.3203 111.4348 138.2369 172.3168 215.7108 271.0244 431.6635 40 48.8864 60.4020 75.4013 95.0255 120.7998 154.7620 199.6351 259.0565 337.8824 442.5926 767.0914 1,779.0903 29.0017 34.3519 16.0969 7.2934 18.5989 20.0236 21.5786 23.2760 25.1290 27.1521 29.3609 31.7725 37.2797 47.5804 19.6147 21.4123 23.4144 25.6454 28.1324 30.9057 33.9990 37.4502 41.3013 45.5992 55.7497 75.8364 28.2432 32.0303 36.4593 41.6459 47.7271 54.8645 63.2490 73.1059 84.7009 98.3471 133.3339 212.7930 34.7849 40.5681 47.5754 56.0849 66.4388 79.0582 94.4608 113.2832 136.3075 164.4940 241.3327 434.7451 881.1702 Used to calculate the future value of a series of equal payments made at the end of each period. Coins can be redeemed for fabulous View some examples on NPV. Assume that the company can invest m, For the year 2015, Ronis Corporation earned a profit of $360,000 on total sales revenue of $2,000,000. Compute the accounting rate of return for, The following data concerns a proposed equipment purchase: Cost - $159,200 Salvage value - $4,800 Estimated useful life - 4 years Annual net cash flows - $46,900 Depreciation method - Straight-line The annual average investment amount used to calcul. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Assume the company uses straight-line depreciation. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. Assume Peng requires a 10% return on its investments. The investment costs $45,000 and has an estimated $6,000 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $3,200 for three years. The asset has an estimated salvage value of $12,000, and an estimated useful life of 10 years. Required information [The following information applies to the questions displayed below.) The asset has no salvage value. For (n= 10, i= 9%), the PV factor is 6.4177. #12 Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. PVA of $1. The investment costs $59,500 and has an estimated $9,300 salvage value. Compute the net present value of this investment. b) 4.75%. Using a sample of Chinese-listed firms with key soil pollution regulation from 2013 to 2020, this study utilized the Difference-in-Differences method . The cost of the asset is $700,000 and it will be depreciated using s, The MoMi Corporation's income before interest, depreciation and taxes, was $1.7 million in the year just ended, and it expects that this will grow by 5% per year forever. earnings equal sales minus the cost of sales What is the internal rate of return if the company buys this machine? gifts. Ronis' investment in asset base is $1,500,000, and they assume a capital charge of 10%. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. D. Representing a taxpayer at a hearing, Take a single physical copy of a book as a cost object. The investment costs $45,000 and has an estimated $6,000 salvage value. Management predicts this machine has a 10-year service life and a $100,000 salvage value, and it uses straight-line depreciation. It generates annual net cash inflows of $10,000 each year. If a table of present v, A company can buy a machine that is expected to have a three-year life and a $29,000 salvage value. All rights reserved. Compute the net present value of this investment. Peng Company is considering an investment expected to generate an average net income after taxes of $3,000 for three years. The company's required, Crispen Corporation can invest in a project that costs $400,000. Peng Company is considering an investment expected to generate an average net income after taxes of $2,200 for three years. The investment costs $56,100 and has an estimated $7,500 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $2,000 for three years. The investment costs $48,600 and has an estimated $6,300 salvage value. Compute the net present value of this investment. Peng Company is considering an investment expected to generate an average net income after taxes Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. A negative NPV would suggest that the project is not worth investing since it will probably yield to a loss while a positive NPV would suggest otherwise. Compute. = (Round answer to, During the year, Loon Corporation has the following transactions: $400,000 operating income; $325,000 operating expenses; $25,000 municipal bond interest; $60,000 long-term capital gain; and $95,000 short-term capital loss. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. straight-line depreciation (Do not round intermediate calculations.). The investment costs $45,000 and has an estimated $6,000 salvage value. The IRR on the project is 12%. The system is expected to generate net cash flows of $13,000 per year for the next 35 years. Assume Peng requires a 10% return on its investments. A machine costs $210,000, has a $14,000 salvage value, is expected to last ten years, and will generate an after-tax income of $43,000 per year after straight-line depreciation. The machine will cost $1,780,000 and is expected to produce a $195,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and a $33,000 salvage value. Compute this machine's accounti, A machine costs $500,000 and is expected to yield an after-tax net income of $19,000 each year. Compute the net present value of this investment. Accounting Rate of Return Choose Denominator: Choose Numerator: T = Accounting Rate of Return = Accounting rate of return 0, Required Information [The following information applies to the questions displayed below) Peng Company is considering an investment expected to generate an average net income after taxes of $1950 for three years. The investment costs $45,600 and has an estimated $6,600 salvage value. Assume Peng requires a 5% return on its investments. The machine will cost $1,796,000 and is expected to produce a $199,000 after-tax net income to be received at the end of each year. The investment costs $45,000 and has an estimated $6,000 salvage value. Presented below is the initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, an, Ahnen Company owns the following investments. Experts are tested by Chegg as specialists in their subject area. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. What is the minimum salvage value that would make the investment attractive assuming a discount rate of 12%? Yea, A company projects an increase in net income of $40,000 each year for the next five years if it invests $500,000 in new equipment. For example: How much would you need to invest today at 10% compounded semiannually to accumulate $5,000 in 6 years from today? There is a 77 percent chance that an airline passenger will (Round each present value calculation to the nearest dollar. Compute the payback period. If the accounting rate of return is 12%, what was the purchase price of the mac. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The expected average rate of return, giving effect to depreciation on investment is 15%. Annual savings in cash operating costs are expected to total $200,000. What is Roni, You are considering an investment in First Allegiance Corp. Assume Peng requires a 5% return on its investments. What amount should Crane Company pay for this investment to earn an 9% return? Compute this machine's accoun, A machine costs $300,000 and is expected to yield an after-tax net income of $9,000 each year. Experts are tested by Chegg as specialists in their subject area. A machine costs $210,000, has a $16,000 salvage value, is expected to last nine years, and will generate an after-tax income of $47,000 per year after straight-line depreciation. e) 42.75%. Assume Peng requires a 10% return on its investments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) The income tax depreciation method referred to as CCA: a) Allows a corporation some flexibility in choosing the class an asset is assigned to. a. The Controller asks you to use a depreciation method that would produce the highest charge against income after three years. A company invests $175,000 in plant assets with an estimated 25-year service life and no salvage value. 2003-2023 Chegg Inc. All rights reserved. information systems, employees, maintenance, and other costs (inputs). The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The salvage value of the asset is expected to be $0. Compute the net present value of this investment. What is the payback period in years ap, The Montana Company has decided to invest in a project that is expected to produce the following cash flows: $12,500 (year 1), $14,000 (year 2) and $9,000 (year 3). turnover is sales div If an asset costs $70,000 and is expected to have a $10,000 salvage value at the end of its ten-year life and generates annual net cash inflows of $10,000 each year, the cash payback period is _____. Createyouraccount. Which of the following functional groups will ionize in Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. A novel dynamic modeling method for a multi-product production line is developed to investigate dynamic properties of the system under random disruptions such as machine failures and market demand . it is expected that: Initial cost $2,780,000 Annual cash inflow $2,540,000 Annual cash outflows $2,260,000 Estimated useful life 10 years Salvage value $4,400,000 Discount rate 8% Calculate the net pr, Lt. Dan Corporation invested $80,000 in a manufacturing equipment. EV of $1. Firm Value Young Corporation expects an EBIT of $16,000 every year forever. Present value of an annuity of 1 The firm is in, A large, profitable corporation with net income exceed $20 million is considering the installation of a new machine that cost $100,000 with the expected salvage value of $20,000 after 4 years of usefu, A company buys a machine for $69,000 that has an expected life of 7 years and no salvage value. Babirusa Company is considering the following investment: Initial capital investment $175,000 Estimated useful life 3 years Estimated disposal value in 3 years $25,000 Estimated annual savings in cas, Sunset Inc. is trying to determine if they should invest in a new machine that would be more efficient and would generate an annual profit of $100,000 (after tax). The warehouse will cost $370,000 to build. S4 000 per year for 6 years accumulates to $29,343.60 ($4,000 7.3359). The investment costs $48,600 and has an estimated $6,300 salvage value. The investment costs $51,900 and has an estimated $10,800 salvage value. Option 1 generates $25,000 of cash inflow per year and has zero residual value. The company anticipates a yearly net income of $3,650 after taxes of 22%, with the cash flows to be received evenly throughout each year. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Using the original cost of the asset, the unadjusted rate of return o, The Charles Company is planning to invest $450,000 in a factory machine. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. What is the cash payback period? Compute the accounting sane of return for this investment assume the company uses straight-line depreciation. To make this happen, the firm, Wilcox Company is considering an investment that will generate cash revenues of $120,000 per year for 8 years, and have cash expenses of $60,000 per year for 8 years. The expected future net cash flows from the use of the asset are expected to be $580,000. Solution: Annual depreciation = (Cost - Salvage value) / useful life = ($45,600 - $8,700) / 3 = $12,300 Annual cash i. Present value (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon value, to the ne, Management of a firm with a cost of capital of 12 percent is considering a $100,000 investment with annual cash flow of $44,524 for three years. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. The machine will cost $1,824,000 and is expected to produce a $206,000 after-tax net income to be re. 1, A machine costs $180,000 and will have an eight-year life, a $20,000 salvage value, and straight-line depreciation is used. Flower Company is considering an investment which will return a lump sum of $2,500,000 six years from now. Assume the company requires a 12% rate of return on its investments. #ifndef Stack_h Fair value method c. Historical cost m, Blue Fin Inc. requires all capital investments to generate a minimum internal rate of return of 15%. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. ), Exercise 26-11 BAP Corporation is reviewing an investment proposal. The following estimates are available: Initial cost = $279,800 Cost of capital = 12% Estima, Strauss Corporation is making an $87,150 investment in equipment with a 5-year life. (before depreciation and tax) $90,000 Depreciation p.a. If a potential investments internal rate of return is above the companys hurdle rate, should the investment be made? , e to the IRS about a taxpayer Compute this machine's accoun, A machine costs $505,000 and is expected to yield an after-tax net income of $20,000 each year. Peng Company is considering an investment expected to generate an average net income after taxes of $3,500 for three years. Compute the net present value of this investment. The estimated cash flow for the investment are as follows: N Description Cash flow ($) 0 price of the system Fo 1-4 revenue per, Joe Sixpack Inc. is considering an investment that will cost is $400,000. (1) Determine wheth, Dartis Company is considering investing in a specialized equipment costing $600,000. Select chart The company anticipates a yearly net income of $2,950 after taxes of 34%, with the cash flows to be received evenly throughout each year. Management predicts this machine has a 10-year service life and a $105,000 salvage value, and it uses straight-line depreciation. The investment costs $51,900 and has an estimated $10,800 salvage value. The investment costs $45,000 and has an estimated $6,000 salvage value. You have the following information on a potential investment. Assume Peng requires a 15% return on its investments. Best study tips and tricks for your exams. O, Reece Manufacturing Company is considering the following investment proposal: The firm uses the straight-line method of depreciation with no mid-year convention. The company is expected to add $9,000 per year to the net income. a. The investment costs $45,600 and has an estimated $6,600 salvage value Compute the accounting rate of return for this investment, assume the company uses straight-line depreciation. 2003-2023 Chegg Inc. All rights reserved. Peng Company is considering an investment expected to generate an average net income after taxes of $2,700 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. Axe anticipates annual net income after taxes of $1,500 from selling the product produced by the new machin, A company can buy a machine that is expected to have a three-year life and a $21,000 salvage value. Assume Peng requires a 15% return on its investments. Compute this machine's accounti, A machine costs $200,000 and is expected to yield an after-tax net income of $5,040 each year. Compute the net present value of this investment. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) The building is expected to generate net cash inflows of $20,000 per year for the next 30 years. Assu, Peng Company is considering an investment expected to generate an average net income after taxes of $3,000 for three years. 2. Our experts can answer your tough homework and study questions. Peng Company is considering an investment expected to generate an average net income after taxes of $2,000 for three years. Required information (The following information applies to the questions displayed below.] The company requires a 10% rate of return on its investments. The current value of the building is estimated to be $300,000. On whether to accept or reject a project, the NPV is interpreted on the result of the calculation. Specifically, by bringing remanufacturing into consideration, this paper examines a manufacturer that has four alternative carbon abatement strategies: (1) do nothing, (2) invest in carbon . Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Answer is complete but user contributions licensed under cc by-sa 4.0, Peng Company is considering an investment expected to generate an average net income after taxes of $2,500 for three years. 7 years c. 6 years d. 5 years, The amount of the estimated average income for a proposed investment of $90,000 in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of 4 years, no residual value. The investment costs $51,600 and has an estimated $10,800 salvage value. The investment costs $45,600 and has an estimated $8,700 salvage value. Capital investment - $15,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow: -Year 1 - $7,00, Compute the net present value of each potential investment. The company uses a discount rate of 16% in its capital budgeting. Compute the accounting rate of return for this investment assume the company uses straight-line depreciation BOOK Accounting Rate of Return Choose Denominator: Choose Numerator = = Accounting Rate of Return Accounting rate of retum Print teferences. 2.3 Reverse innovation. What method, A machine costs $400,000 and is expected to yield an after-tax net income of $9,000 each year. A machine costs $190,000, has a $10,000 salvage value, is expected to last nine years, and will generate an after-tax income of $30,000 per year after straight-line depreciation. Management predicts this machine has an 11-year service life and a $140,000 salvage value, and it uses s, A machine costs $400,000 and is expected to yield an after-tax net income of $9,000 each year. Accounting Rate of Return Choose Denominator: Choose Numerator: 7 = Accounting Rate of Return = Accounting rate of return, Required information [The following information applies to the questions displayed below.] The company uses the straight-line method of depreciation and has a tax rate of 40 percent. Explain. The business environment, namely market uncertainty and competition intensity, is also analysed in association with the firm's strategic orientation. The company requires an 8% return on its investments. X Get access to this video and our entire Q&A library, How to Calculate Net Present Value: Definition, Formula & Analysis. The investment costs $47,400 and has an estimated $8,400 salvage value. The net present value (NPV) is a capital budgeting tool. Capital investment $180,000 Estimated useful life 3 years Estimated salvage value 0 Estimated annual net cash inflow $75,000 Required rate of return 10% What is the net present value of the inv, If an asset costs $210,000 and is expected to have a $30,000 salvage value at the end of its 10-year life, and it generates annual net cash inflows of $30,000, the cash payback period is: a. Input the cash flow values by pressing the CF button. Negative amounts should be indicated by #12 It gives us the profitability and desirability to undertake the project at our required rate of return. The net cash flows are estimated to be $7,610 per year for the next 5 years and no salvage value is anticipated. Anglemenesis Company is planning to spend $84,000 for a new machine that is to be depreciated on a straight-line basis over 10 years with no salvage value.