What are the appropriate labels for classifying the relationship between this cost item and th Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Ronis' investment in asset base is $1,500,000, and they assume a capital charge of 10%. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Furthermore, the implication of strategic orientation for . The investment costs $59,400 and has an estimated $7,200 salvage value. investment costs $51,600 and has an estimated $10,800 salvage Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Input the cash flow values by pressing the CF button. 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. The system is expected to generate net cash flows of $13,000 per year for the next 35 years. View some examples on NPV. The present value of the future cash flows at the company's desired rate of return is $100,000. Peng Company is considering an investment expected to generate Req, A company is contemplating investing in a new piece of manufacturing machinery. You have the following information on a potential investment. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be rece, A company can buy a machine that is expected to have a three-year life and a $25,000 salvage value. and EVA of S1) (Use appropriate factor(s) from the tables provided. #define An irrigation canal contractor wants to determine whether he $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. Good estimates are available for the initial investment and the a, Pito Company has been in operation for several years. Management predicts this machine has a 10-year service life and a $100,000 salvage value, and it uses straight-line depreciation. The investment costs $45,000 and has an estimated $10,800 salvage value. Compute the, A company is considering the following investment project: Capital outlay $200,000 Net Profit p.a. 6 years c. 7 years d. 5 years. See Answer. Compute the net present value of this investment. The investment costs $47,400 and has an estimated $8,400 salvage value. This investment will produce certain services for a community such as vehicle kilometres, seat . The Controller asks you to use a depreciation method that would produce the highest charge against income after three years. Management predicts this machine has a 9-year service life and a $140,000 salvage value, and it uses str, A machine costs $500,000 and is expected to yield an after-tax net income of $19,000 each year. Peng Company is considering an investment expected to generate an average net income after taxes of $3,250 for three years. Yearly depreciation = (56,100 - 7,500) / 3 = $16,200.00. Note: NPV is always a sensitive problem bec. The present value of the future cash flows is $225,000. a. Compute the net present value of this investment. Get access to this video and our entire Q&A library, How to Calculate Net Present Value: Definition, Formula & Analysis. What is Ronis' Return on Investment for 2015? To find the NPV using a financial calacutor: 1. The machine will cost $1,772,000 and is expected to produce a $193,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and a $36,000 salvage value. The investment costs $48,600 and has an estimated $6,300 salvage value. What rate of return should you expect for your investment in Fir, If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment, which method would the investor normally use to account for this investment? For example: How much would you need to invest today at 10% compounded semiannually to accumulate $5,000 in 6 years from today? The investment costs $45,000 and has an estimated $6,000 salvage value. The company uses straight-line depreciation. Compute the payback period. Assume that net income is received evenly throughout each year and straight-line depreciation is used. The company requires an 8% return on its investments. Estimate Longlife's cost of retained earnings. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction. All rights reserved. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. information systems, employees, maintenance, and other costs (inputs). The management of Samsung is planning to invest in a new companywide computerized inventory tracking system. The salvage value of the asset is expected to be $0. Solution: Annual depreciation = (Cost - Salvage value) / useful life = ($45,600 - $8,700) / 3 = $12,300 Annual cash i. check bags. 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. For l6, = 8%), the FV factor is 7.3359. The estimated life of the machine is 5yrs, with no salvage value. The income tax depreciation method referred to as CCA: a) Allows a corporation some flexibility in choosing the class an asset is assigned to. It expects the free cash flow to grow at a constant rate of 5% thereafter. Which option should the company choose to invest in? $ $ Accounting Rate of Return Choose . On whether to accept or reject a project, the NPV is interpreted on the result of the calculation. The business environment, namely market uncertainty and competition intensity, is also analysed in association with the firm's strategic orientation. Compute the net present value of this investment. Zhang et al. 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. Required information [The following information applies to the questions displayed below.) Determine. 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. Assume the company uses straight-line . A machine costs $700,000 and is expected to yield an after-tax net income of $52,000 each year. The building has an estimated useful life of 40 years and an expected salvage value of $550,000. The investment costs$45,000 and has an estimated $6,000 salvage value. Given the riskiness of the investment opportunity, your cost of capital is 27%. What amount should Cullumber Company pay for this investment to earn a 12% return? 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 $1,950 for three years. QS 25-7 Computation of accounting rate of return LO P2 Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The corporate tax rate is 35 percent. Peng Company is considering an investment expected to generate an average net income after taxes of $2,700 for three years. The cost of the asset is $120,000, Babirusa Company is considering the following investment: Assume straight-line depreciation is used. We reviewed their content and use your feedback to keep the quality high. The NPV is computed as: {eq}\displaystyle \text{Present value of annuity (PVA) } = P * \frac{1 - (1 + r)^{-t}}{r} {/eq}, Become a Study.com member to unlock this answer! 1, A machine costs $180,000 and will have an eight-year life, a $20,000 salvage value, and straight-line depreciation is used. What is the present value, The Best Manufacturing Company is considering a new investment. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. 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 $3,500 for three years. The firm has a beta of 1.62. What is the return on investment? What is the accountin, A company buys a machine for $77,000 that has an expected life of 6 years and no salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $2, 400 for three years. Free and expert-verified textbook solutions. #12 Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. 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. Accounting 202 Final - Formulas and Examples. Assume the company uses straight-line . a. The following information applies to // Header code for stack // requesting to create source code Management predicts this machine has an 8-year service life and a $60,000 salvage value, and it uses straight-line depreciation. Talking on the telephon Ass, Peng Company is considering an Investment expected to generate an average net income after taxes of $3,000 for three years. Compute the net present value of this investment. Which of, Fraser Company will need a new warehouse in eight years. The investment costs $56,100 and has an estimated $7,500 salvage value. The product line is estimated to generate cash inflows of $300,000 the first year, $250,000 the second year, and $200,000 each year thereafter for ten more years. The investment costs $59.100 and has an estimated $6.900 salvage value. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000. Choose Numerator: Accounting Rate of Return Choose Denominator: = Accounting Rate of Return = Accounting rate of return, Required information [The following information applies to the questions displayed below.) The investment costs $49,500 and has an estimated $10,800 salvage value. Compute the net present value of this investment. The investment costs $45,000 and has an estimated $6,000 salvage value. e) 42.75%. Compute the net present value of this investment. Assume Peng requires a 10% return on its investments. These assets contribute $28,000 to annual net income when depreciation is computed on a straight-line basis. Select Chart Amount x PV Factor = Present Value Cash Flow Annual cash flow Residual value Net present value, Required information [The folu.ving information applies to the questions displayed below.) The company has projected the following annual for the investment. A company is investing in a solar panel system to reduce its electricity costs. 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. The investment costs $54,000 and has an estimated $7,200 salvage value. Required: Prepare the, X Company is thinking about adding a new product line. 200,000. FV of $1. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. Yearly net cash inflows (before taxes) from the machine are estimated at $140,000. Capital investment - $100,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow Year 1 - $50,000 Year 2 - $47,000 Year 3 - $44,000 Required rate, You have the following information on a potential investment: Capital Investment - $100,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow: Year 1 - $50,000 Y, Lt. Dan Corporation invested $90,000 in manufacturing equipment. Management predicts this machine has a 12-year service life and a $40,000 salvage value, and it uses straight-line depreciation. 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. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. What is the most that the company would be willing to invest in this, A company has a minimum required rate of return of 9%. 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 . 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. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The company is expected to add $9,000 per year to the net income. Each investment costs $480. 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. Assume Peng requires a 15% return on its investments. The excess cost over the book value of an investment that is due to expected above-average earnings is labeled on the consolidated balance sheet as: a. Management estimates the machine will yield an after-tax net income of $12,500 each year. The projected incremental income from the investment is as follows: The unadjusted rate of return on the in, Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.) All rights reserved. #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%. Experts are tested by Chegg as specialists in their subject area. Enter the email address you signed up with and we'll email you a reset link. The investment has zero salvage value. You w, A machine that cost $720,000 has an estimated residual value of $60,000 and an estimated useful life of eleven years. c. Retained earnings. The company's desired rate of return used in the present value calculations was, A company is considering investment in a project that costs Rs. Assume Peng requires a 15% return on its investments. Peng Company is considering an investment expected to generate an average net income after taxes of $2,100 for three years. TABLE B.3 Present Value of an Annuity of 1 Rat Periods 1% 2% 4% 5% 6% 7% 5% 10% 12% 15% 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.8929 0.8696 1.9704 1.9416 1.9135 1.88611.8594 1.8334 8080 1.7833 1.759 .7355 16901 1.6257 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.4869 2.4018 2.2832 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 3.0373 2.8550 3.9927 3.8897 3.7908 3.6048 3.3522 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.1114 3.7845 5.3893 5.2064 5.0330 4.8684 4.5638 4.1604 7.6517 7.3255 7.0197 6.73276.4632 6.2098 5.9713 5.7466 5.5348 5.3349 4.9676 4.4873 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 5.7590 5.3282 4.7716 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.6502 5.0188 7.1390 6.8052 6.4951 5.93775.2337 11.255 10.5753 9.95409.3851 8.8633 8.3838 7.9427 7.5361 7.1607 6.8137 6.1944 5.4206 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 7.4869 7.1034 6.4235 5.5831 13.0037 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 8.2442 7.7862 7.3667 6.6282 5.7245 13.8651 .8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 8.0607 7.6061 6.8109 5.8474 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514 8.3126 7.8237 6.9740 5.9542 15.5623 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.1196 6.0472 16.3983 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.2497 6.1280 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.3658 6.1982 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.4694 6.2593 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.8226 9.0770 7.8431 6.4641 25.8077 22.3965 19.6004 17.2920 5.3725 13.7648 12.4090 11.2578 10.2737 9.4269 8.0552 6.5660 29.4086 24.9986 21.4872 18.6646 16.3742 14.4982 12.9477 11.6546 10.5668 9.6442 8.1755 6.6166 32.8347 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574 9.7791 8.2438 6.6418 4.8534 4.7135 4.57974.4518 4.3295 4.2124 4.1002 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 10.3676 9.7868 26 8.7605 8.3064 7.8869 7.4987 12 13 14 15 16 19 20 25 30 35 40 Used to calculate the present value of a series of equal payments made at the end of each period. Management predicts this machine has a 10-year service life and a $105,000 salvage value, and it uses straight-line depreciation. Compute the net present value of this investment. The company is considering an investment that would yield an after-tax cash flow of $30,000 in four years. 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). The investment costs $45,000 and has an estimated $6,000 salvage value. Accounting Rate of Return = Net Income / Average Investment. The investment costs $45,600 and has an estimated $8,700 salvage value. A bond that has a $1,000 par value (face value) and a con, Strauss Corporation is making a $70,000 investment in equipment with a 5-year life. a) 2.85%. Using straight-line, Wildhorse Company owns equipment that costs $1,071,000 and has accumulated depreciation of $452,200. The following information applies to the questions displayed below.J Peng Company is considering an investment expected to generate an average net income after taxes of $2,800 for three years. For example: What is the future value of $4,000 per ye ar for 6 years assuming an annual interest rate of 8%. c) 6.65%. negative? 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. , ided by total investment.. total investment is current assets (inventories, accounts receivables and cash) plus fixed assets. Management predicts this machine has a 10-year service life and a $100,000 salvage value, and it uses st, A machine costs $700,000 and is expected to yield an after-tax net income of $30,000 each year. The company requires a 10% rate of return on its investments. The investment costs $45,000 and has an estimated $6.000 salvage value. 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. Select chart Compute this machine's accoun, If an asset costs $210,000 and is expected to have a $30,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $30,000 each year, the cash payback period is: A) 8 years B) 7 years C) 6 years D) 5 years, The anticipated purchase of a fixed asset for $400,000 with a useful life of 5 years and no residual value is expected to yield a total income of $150,000. What lump-sum amount should the company invest now to have the $370,000 available at the end of the eight-year period?
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