an invstment project with no residual value has a net present value of $87,980when it is discounted using a cost of capital of 10%. the annual cash flows are as follows year $ 0 2000,000 1 80,000 290,000 3 100,000 4 60,000

an invstment project with no residual value has a net present value of $87,980when it is discounted using a cost of capital of 10%. the annual cash flows are as follows year $ 0 2000,000 1 80,000 290,000 3 100,000 4 60,000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

See similar textbooks

Related questions

Q: REQUIRED: For the year ended 31 December 2019 show the following: 1. The Statement of…

A: As per the IFRS 'Borrowing Cost', Borrowing costs incurred to acquire the Qualifying Asset shall be…

Q: Required: 1. to 3. Prepare the journal entries to record the purchase of the bonds by Saxton-Bose on…

A: Company will issue bond at discount i..e market rate is more than the quoted rate in the bond.

Q: An inexperienced accountant for Bramble Corp. showed the following in the income statement: net…

A: The income statement is prepared to record the revenues and expenses of the current period. The net…

Q: Briefly explain three non cash dividend options

A: Dividend is a distribution of profit of company to its shareholders. When company earn profit. The…

Q: Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on…

A: Depreciation is a non cash expense which is charged for the part which has been considered to be…

Q: The equipment reverts back to the lessor at the end of the lease term. How much is interest expense…

A: The lease agreement is a contract between the two parties in which one party rents it assets to the…

Q: On January 1, Year 5, Raven Limo Service, Incorporated sold a used limo that had cost $64,000 and…

A: When an asset is sold it leads to a cash inflow for the company. It is also accompanied by a profit…

Q: When market value of an asset is higher than book value, depreciation is not charged. A) True B)…

A: Meaning of depression. Depreciation is a reduction in the value of asset due to wear and tear,…

Q: Required a. Write up the General Journal for the month b. Write yup the Respective Ledger accounts…

A: Record Keeping is an important part of the Business. Journal is used to record the transactions at…

Q: Make accounting entries for following perpetual inventory transaction Nov1,2019 business owner Sam…

A: The journal is the first step of recording the business transactions. The transactions are recorded…

Q: What is the difference of segment reporting and operating segments? Are they interrelated? Please…

A: Introduction: The inclusion of a company's current segments in the disclosures that accompany its…

Q: Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from…

A: Variances shows the amount of difference between the costs estimated that is standard cost and the…

Q: 10-2 (Algo) Reporting Bonds Issued at Par LO 10-2 The following information applies to the questions…

A: Price of bond is the present value of coupon payment and present value of par value of bond taken on…

Q: Tuscan Incorporated had a retained earnings balance of $86,000 at December 31, 2019. During the…

A: The statement of retained earnings is an essential financial statement prepared by the management.…

Q: The fixed budget for 20,000 units of production shows sales of $400,000; variable costs of $80,000;…

A: Working:

Q: The income statement for the month of June, 2020 of Snap Shot, Inc. contains the following…

A: The closing entries are prepared at the end of an accounting period to close all the temporary…

Q: Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the…

A: Depreciation represents the reduction in the value of an asset over a useful life of the asset. It…

Q: How much is the retirement benefit expense taken to profit or loss for the year ended December 31,…

A: IAS 119, The actuarial gain or losses are recognized as re-measurement effect in the OCI. In the…

Q: Hensel Manufacturing separates its manufacturing overhead costs into 2 broad categories: (1)…

A: Here discuss about the details of the allocation of overhead cost into activity cost pool on the…

Q: On January 1, 2020, Aylmer offered to sell some shares on a subscription basis. The offer was for…

A: Shares on subscription is an arrangement in which payments against the shares are made in…

Q: Derek dreaming of opening his own restaurant but has no idea about how to run let alone where to…

A: Answer:- Restaurant meaning:- A restaurant is basically a place where food and drinks are prepared…

Q: PROBLEM I - UPSTREAM AND DOWNSTREAM SALES OF INVENTORY AND FIXED ASSETS On January 1, 2014, P…

A: In consolidation of financial statements, inter company inventory transfered at above the cost of…

Q: Allied Construction and Axis Construction reported the following information in their annual…

A: The ratio analysis helps to analyse the financial statements of the business on regular basis.…

Q: Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the…

A: Under the units-of-production method or activity method the yearly depreciation is calculated based…

Q: At December 31, Hawke Company reports the following results for its calendar year. Cash sales $…

A: Introduction: An unadjusted trial balance lists the accounts of a general ledger. It's prepared at…

Q: The following data for the Golden Garden Company (GGC) pertains to the production of 2,500 garden…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: Prepare journal entries to record these events (including the amortization of the cost of the van)…

A: This question belongs the the 'Not-for-Profit Organizations. Not-for-Profit Organizations are…

Q: How much is the retirement benefit expense taken to profit or loss for the year ended December 31,…

A: Employee Benefit expenses will be recognised as it incurred it for current year as principles laid…

Q: trial balance

A: A trial balance is an accounting worksheet where all ledger balances are combined into columns for…

Q: prepare the journal entry to record the payroll tax expense and fringe benefit expense for Webber…

A: Payroll Expenses For the Federal Taxes the Payroll deduction which are incurred for FICA social…

Q: On 9/1, one company had total stockholders' equity of $158,000. During the month, it had net income…

A: Stockholders' equity: Stockholders' equity means the net assets available to shareholders after…

Q: plain what Real Property Gains Tax is in a Malaysian context and its basis of taxation.

A: The government in order to control the prices of property and prevent bubble in property there are…

Q: The comparative balance sheets for Novak Corp. as of December 31 are as follows. Novak Corp.…

A: Cash flow statement includes: Cash flows from operating activities Cash flows from investing…

Q: On January 1, 2019, Matcha Company purchased 25% of the outstanding ordinary shares of Milk Tea…

A: Here discuss about the details of the equity investment and its carrying value after added up the…

Q: Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single…

A: The predetermined overhead rate is calculated as estimated overhead cost divided by estimated base…

Q: Ivy Corp declared a share capital dividend entitling its shareholders to one additional share for…

A: >Share Capital dividend or Stock dividend is the dividend given to stockholders in form of new…

Q: [The following information applies to the questions displayed below.] Hickory Company manufactures…

A: Particulars Amount Machining overhead $213,400 Machine setups overhead $61,600 Product design…

Q: 11. Onslow Company purchased a used machine for $240,000 cash on January 2. On January 3, Onslow…

A: >Accounting principle states that the cost of the long term assets (like equipment) is to be…

Q: Explain why ethical auditing is the regular comprehensive evaluation of the compliance of the firm’s…

A: An ethical audit is an inspection or assessment of processes or systems to guarantee compliance with…

Q: A telephone system, inclusive of PBX, handsets, and automatic re-diallers was purchased on January…

A: Cost of assets include purchase cost, installation cost , commission cost and other direct cost…

Q: On January 1, Mitzu Company pays a lump-sum amount of $2,600,000 for land, Building 1, Building 2,…

A: The straight line depreciation method depreciates the assets equally each year. Depreciation expense…

Q: Ace Hardware is adding a new product line that will require an investment of $1,454,000. Managers…

A: Calculation of Accounting rate of return(ARR):- Accounting rate of return(ARR) = 13.15%…

Q: Lucia Company has set the following standard cost per unit for direct materials and direct labor.…

A: The variance is calculated by comparing the actual cost with the standard cost . If the actual cost…

Q: On January 1, 2020, ABC enters into a contract with a customer to transfer a license for a fixed fee…

Q: Exercise 8-3 (Algo) Lump-sum purchase of plant assets LO C1 Rodriguez Company pays $321,165 for real…

A: The lump sum paid to acquire multiple assets is allocated to various assets on the basis of their…

Q: Explain the following: 1. Development of accounting rules. 2. How Generally Accepted Accounting…

A: Here discuss about the details of development in the Accounting rules which are incurred in the late…

Q: Springer Energy Inc. produces food products for people active in sports. The following budgeted…

A: For absorption costing, all manufacturing costs including fixed and variable are included in product…

Q: Debra Moore needs $20,000 3 years from now. How much should she invest today in order to reach her…

A: Answer : Future value = $20,000 Interest rate = 6% n = 3 Years Calculation of Present value :…

Q: On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts…

A: Noncollectable Receivables: Receivables, loans, or other forms of debt that will not be paid back by…

Q: The payroll register of Sara Company indicates $5,850 of social security tax withheld and $1,600 of…

A: Introduction: Payroll tax expense account is indeed the holding account used to keep track of the…

Question

an invstment project with no residual value has a net present value of
$87,980when it is discounted using a cost of capital of 10%. the annual cash
flows are as follows
year $
0 2000,000
1 80,000
2 90,000
3 100,000
4 60,000
5 40,000
Calculate the Internal Rate of Return (IRR) of the project. (use Discount factor
20% as high level)
a.
25.7%
b.
H
17.3%
C.
11.6%
d.
16.4%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land must be returned to its natural state at a cost of $25 million, payable at the end of Year 2. Plot the project’s NPV profile. Should the project be accepted if r = 8%? If r = 14%? Explain your reasoning. Can you think of some other capital budgeting situations in which negative cash flows during or at the end of the project’s life might lead to multiple IRRs? What is the project’s MIRR at r = 8%? At r = 14%? Does the MIRR method lead to the same accept-reject decision as the NPV method?
Net present value method, internal rate of return method, and analysis for a service company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The wind turbines require an investment of 887,600, while the biofuel equipment requires an investment of 911,100. No residual value is expected from either project. Instructions 1. Compute the following for each project: A. The net present value. Use a rate of 6% and the present value of an annuity table appearing in Exhibit 5 of this chapter. B. A present value index. (Round to two decimal places.) 2. Determine the internal rate of return for each project by (A) computing a present value factor for an annuity of 1 and (B) using the present value of an annuity of 1 table appearing in Exhibit 5 of this chapter. 3. What advantage does the internal rate of return method have over the net present value method in comparing projects?