Answered: 1-Cinemar Productions bought a piece of…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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1-Cinemar Productions bought a piece of equipment for $150,847 that will last for 5 years. The equipment will generate net operating cash flows of $45,000 per year and will have no salvage value at the end of its life. What is the internal rate of return?

2-Your company is planning to purchase a new log splitter for its lawn and garden business. The new splitter has an initial investment of $81,000. It is expected to generate $10,000 of annual cash flows, provide incremental cash revenues of $152,437, and incur incremental cash expenses of $130,000 annually. What is the payback period? What is the APR?

3-How much must be invested now to receive $28,000 for 11 years if the first $28,000 is received one year from now and the rate is 8%? Round your present value factor to three decimal places and final answer to the nearest dollar.

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Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated revenue producing life of 4 years. Falkland has a cost c
capital of 12%. The patent is expected to generate the following amounts of annual income and cash flows:
Year 1
Year 2
Year 3
Year 4
Net income
$5,100
$6,500
$6,300
Operating cash flows
18,400
18,200
(Click here to see present value and future value tables)
006'
A. What is the NPV of the investment? Round your present value factor to three decimal places and final answer to the nearest dollar.
24
B. What happens if the required rate of return increases?
If the required rate of return increases,
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