Boston Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: Boston Cola uses a required rate of return of 14% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Data Table Year Amount Year 1 $15,000 Year 2 11,000 Year 3 10,000 Year 4 8,000 Total $44,000 (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) Calculate the following for the special purpose bottling machine: 1. Net present value 2. Payback period 3. Discounted payback period
Boston Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: Boston Cola uses a required rate of return of 14% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Data Table Year Amount Year 1 $15,000 Year 2 11,000 Year 3 10,000 Year 4 8,000 Total $44,000 (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) Calculate the following for the special purpose bottling machine: 1. Net present value 2. Payback period 3. Discounted payback period
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA3: Time Value Of Money
Section: Chapter Questions
Problem 11E
Related questions
Question
Boston Cola is considering the purchase of a special-purpose bottling machine for $35,000.
It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs:
Boston Cola uses a required
Data Table
|
Year |
Amount |
|
Year 1 |
$15,000 |
|
Year 2 |
11,000 |
|
Year 3 |
10,000 |
|
Year 4 |
8,000 |
|
Total |
$44,000 |
(Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.)
|
Calculate the following for the special purpose bottling machine:
|
|
. |
Transcribed Image Text:Present Value of $1
Periods
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
40%
Periods
0.806
0.781
0.610
Period 1 0.980
0.062
0.043
0.926
0.900
0.893
0.877
0.862
0.847
0.833
0.820
0.794
0.769
0.758
0.714
Period 1
Period 2 0.961
0.925
0.890
0.857
0.826
0.797
0.769
0.743
0.718
0.604
0.672
0.650
0.630
0.592
0.574
0.510
Period 2
Period 3 0.942
0.889
0.840
0.794
0.751
0.712
0.675
0.641
0.609
0.579
0.551
0.524
0.500
0.477
0.455
0.435
0.364
Period 3
Period 4 0.924
0.855
0.792
0.735
0.683
0.636
0.592
0.552
0.518
0.482
0.451
0.423
0.307
0.373
0.350
0.329
0.260
Period 4
Period 5 0.908
0.822
0.747
0.681
0.621
0.567
0.519
0.476
0.437
0.402
0.370
0.341
0.315
0.186
0.201
0.227
0.269
0.250
Period 5
Period 6 0.888
0.790
0.705
0.630
0.583
0.540
0.584
0.507
0.456
0.410
0.370
0.335
0.303
0.275
0.250
0.207
0.189
0.143
0.133
Period 6
Period 7 0.871
0.760
0.665
0.513
0.452
0.400
0.354
0.314
0.279
0.249
0.222
0.198
0.178
0.159
0.095
Period 7
Period 8 0.853
0.731
0.627
0.407
0.404
0.351
0.305
0.266
0.233
0.204
0.179 0.157
0.139
0.123
0.108
0.068
Period 8
Period 9 0.837
0.703
0.592
0.500
0.424
0.361
0.308
0.263
0.225
0.194
0.167
0.144
0.125
0.108
0.094
0.082
0.048
Period 9
Period 10 0.820
0.676
0.558
0.463
0.386
0.322
0.270
0.227
0.191
0.182
0.099
0.137
0.112
0.118
0.085
0.000
0.052
0.073
0.062
0.035 Period 10
Period 11 0.804
0.650
0.527
0.429
0.350
0.287
0.237
0.195
0.162
0.135
0.094
0.079
0.058
0.047
0.025
Period 11
Period 12 0.788
0.625
0.497
0.307
0.319
0.257
0.208
0.168
0.137
0.112
0.092
0.076
0.082
0.043
0.036
0.018 Period 12
Period 13 0.773
0.601
0.409
0.368
0.290
0.229
0.182
0.145
0.116
0.093
0.075
0.061
0.050
0.040
0.033
0.027
0.013 Period 13
Period 14 0.758
0.577
0.442
0.340
0.263
0.205
0.160
0.125
0.099
0.078
0.062
0.049
0.039
0.032
0.025
0.025 0.020
0.021
0.009
Period 14
Period 15 0.743
0.555
0.417 0.315
0.239
0.183
0.140
0.108
0.084
0.085 0.051
0.040 0.031
0.018
0.006 Period 15
0.123
0.005 Period 16
Period 16 0.728
Period 17 0.714
0.534
0.394 0.292
0.218
0.163
0.093 0.071
0.054 0.042
0.032 0.025
0.019
0.015
0.012
0.513
0.371
0.270
0.198
0.148
0.108
0.015
Period 17
0.080
0.060
0.060
0.045
0.034
0.026
0.020
0.012
0.009
0.003
Period 18 0.700
0.494
0.350 0.250
0.180
0.130
0.095
0.051
0.038 0.028
0.021
0.016
0.012
0.009
0.007
0.002 Period 18
Period 19 0.686
0.475
0.331
0.232
0.184
0.116
0.083
0.060
0.043
0.031
0.023
0.017
0.012
0.009
0.007
0.005
0.002
Period 19
Period 20 0.673
0.456
0.312 0.215
0.140
0.104
0.073
0.051
0.037
0.028
0.019
0.014
0.010
0.007
0.005
0.004
0.001 Period 20
0.003
0.083
0.006
0.004
Period 21 0.660
0.439
0.294 0.199
0.135
0.001 Period 21
0.084
0.056
0.044 0.031
0.022 0.015
0.011
0.008
0.006
0.004
0.003
Period 22 0.647
0.422
0.278
0.184
0.123
0.038 0.026
0.018
0.013
0.000
0.003
0.002
0.002
0.001
Period 22
Period 23 0.634
0.406
0.262
0.170
0.112
0.074
0.049
0.033 0.022
0.015
0.010
0.007
0.005
0.003
0.002
0.000 Period 23
Period 24 0.622
0.390
0.247
0.158
0.102
0.086
0.043
0.028
0.019
0.013
0.008
0.003
0.006
0.005
0.004
0.002
0.001
0.000 Period 24
Period 25 0.610
0.375
0.233
0.146
0.092 0.059
0.038
0.024
0.016
0.010
0.007
0.003
0.002 0.001
0.001
0.000 Period 25
Period 26 0.598 0.361
0.220
0.135
0.084 0.053 0.033
0.021 0.014
0.009
0.008
0.004 0.002 0.002 0.001
0.001
0.000 Period 26
0.347
0.207
0.125
0.007
0.003
0.001
0.001
Period 27
0.000 Period 28
Period 27 0.586
0.076
0.047 0.029
0.018
0.011
0.005
0.002
0.001
0.000
Period 28 0.574
0.333
0.196
0.116
0.080
0.042 0.026
0.016
0.010
0.008
0.004
0.002
0.002
0.001
0.001
0.000
Period 29 0.563
0.321
0.185
0.107
0.063
0.037
0.022
0.014
0.008
0.005
0.003
0.002
0.001
0.001
0.000
0.000
0.000 Period 29
Period 30 0.552
0.308
0.174
0.009
0.057
0.033
0.020
0.012
0.007
0.004
0.003
0.002
0.001
0.001
0.000
0.000
0.000
0.000
Period 30
Period 35 0.500
0.253
0.130
0.068
0.036
0.019
0.010
0.006
0.003
0.002
0.001
0.001
0.000
0.000
0.000
0.000
Period 35
Period 40 0.453
0.208
0.007
0.048
0.022
0.011
0.005
0.003
0.001
0.001
0.000
0.000
0.000
0.000
0.000
0.000
0.000
Period 40
Transcribed Image Text:Present Value of Annuity of $1.00 in Arrears*
Periods
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
40%
Periods
Period 1 0.980
Period 2
0.062
0.009
0.803
0.833
0.820
1.492
0.043
0.026
0.877
0.882
0.847
0.808
0.794
0.781
0.760
0.758
0.714
Period 1
1.942
1.886
1.833
1.783
1.736
1.690
1.647
1.605
1.566
1.528
1.457
1.424
1.302
1.361
1.331
1.224
Period 2
Period 3
2.884
2.775
2.673
2.577
2.487
2.402
2.322
2.248
2.174
2.106
2.042
1.981
1.923
1.868
1.816
1.766
1.580
Period 3
2.600
3.127
Period 4 3.808
3.630
3.465
3.312
3.170
3.037
2.914
2.798
2.580
2.494
2.404
2.320
2.241
2.166
2.096
1.849
Period 4
Period 5
4.713
4.452
4.212
3.993
3.791
3.605
3.433
3.274
2.991
2.884
2.745
2.635
2.532
2.436
2.345
2.035
Period 5
Period 6 5.601
5.242
4.917
4.623
4.355
4.111
3.889
3.685
3.498
3.326
3.167
3.020
2.885
2.750
2.643
2.534
2.168
Period 6
Period 7 6.472
6.002
5.582
5.208
4.868
4.504
4.288
4.030
3.812
3.605
3.416
3.242
3.083
2.037
2.802
2.677
2.263
Period 7
Period 8 7.325
6.733
6.210
5.747
5.335
4.088
4.639
4.344
4.078
3.837
3.619
3.421
3.241
3.076
2.925
2.786
2.331
Period 8
Period 9 8.162
7.435
6.802
6.247
5.759
5.328
4.946
4.607
4.303
4.031
3.786
3.566
3.366
3.184
3.019
2.868
2.379
Period 9
4.404
4.656
Period 10 8.983
8.111
7.360
6.710
6.145
5.650
5.218
4.833
4.192
3.923
3.682
3.465
3.269
3.092
2.930
2.414 Period 10
Period 11 9.787
8.760
7.887
7.139
6.495
5.038
5.453
5.029
4.327
4.035
3.776
3.543
3.335
3.147
2.978
2.438 Period 11
Period 12 10.575
9.385
8.384
7.536
6.814
6.194
5.660
5.197
4.793
4.439
4.127
3.851
3.608
3.387
3.190
3.013
2.456 Period 12
Period 13 11.348
9.086
8.853
7.904
7.103
6.424
5.842
5.342
4.910
4.533
4.203
3.912
3.658
3.427
3.223
3.040
2.469 Period 13
Period 14 12.106 10.563
9.295
8.244
7.367
6.628
6.002
5.468
5.008
4.611
4.265
3.962
3.605
3.459
3.249
3.061
2.478 Period 14
Period 15 12.849
11.118
9.712
8.559
7.606
6.811
6.142
5.575
5.002
4.675
4.315
4.001
3.726
3.483
3.268
3.076
2.484 Period 15
Period 16 13.578
11.652
10.106
8.851
7.824
6.974
6.265
5.668
5.162
4.730
4.357
4.033
3.751
3.503
3.283
3.088
2.489 Period 16
Period 17 14.292 12.166
10.477
9.122
8.022
7.120
6.373
5.749
5.222
4.775
4.391
4.050
3.771
3.518
3.295
3.097
2.492 Period 17
4.812
4.410
4.442
Period 18 14.992 12.659
10.828
9.372
8.201
7.250
6.487
5.818
5.273
4.080
3.786
3.529
3.304
3.104
2.494 Period 18
Period 19 15.678
13.134
11.158
9.604
8.365
7.386
6.550
5.877
5.316
4.843
4.097
3.799
3.539
3.311
3.109
2.496 Period 19
Period 20 18.351 13.590
11.470
9.818
8.514
7.409
6.623
5.929
5.353
4.870
4.460
4.110
3.808
3.546
3.316
3.113
2.497 Period 20
Period 21 17.011
14.029
11.764
10.017
8.649
7.562
6.687
5.973
5.384
4.891
4.476
4.121
3.816
3.551
3.320
3.110
2.498 Period 21
Period 22 17.658 14.451
12.042 10.201
8.772
7.645
6.743
6.011
5.410
4.909
4.488
4.130
3.822
3.556
3.323
3.118
2.498 Period 22
Period 23 18.292
14.857
12.303 10.371
8.883
7.718
6.792
6.044
5.432
4.925
4.499
4.137
3.827
3.559
3.325
3.120
2.499 Period 23
6.073
4.143
4.147
3.327
3.121
2.499 Period 24
2.499 Period 25
Period 24 18.914 15.247
12.550 10.529
8.985
7.784
6.835
5.451
4.937
4.948
4.507
3.831
3.562
9.077
6.007
6.118
Period 25 19.523 15.622
12.783 10.675
7.843
6.873
5.467
4.514
3.834
3.564
3.329
3.122
Period 26 20.121 15.983
13.003
10.810
9.161
7.896
6.906
5.480
4.956
4.520
4.151
3.837
3.566
3.330
3.123
2.500 Period 26
Period 27 20.707 16.330
13.211
10.935
9.237
7.043
6.935
6.136
5.492
4.964
4.524
4.154
3.839
3.567
3.331
3.123
2.500 Period 27
Period 28 21.281
16.683
13.406 11.051
9.307
7.984
6.981
6.152
5.502
4.970
4.528
4.157
3.840
3.568
3.331
3.124
2.500 Period 28
Period 29 21.844 18.984
13.591
11.158
9.370
8.022
6.983
6.166
5.510
4.975
4.531
4.150
3.841
3.569
3.332
3.124
2.500 Period 29
Period 30 22.396 17.292
13.765 11.258
9.427
8.055
7.003
6.177
5.517
4.979
4.534
4.160
3.842
3.569
3.332
3.124
2.500 Period 30
4.992
4.184
4.166
Period 35 24.999
18.665
14.498
11.655
9.644
8.176
7.070
6.215
5.539
4.541
3.845
3.571
3.333
3.125
2.500 Period 35
Period 40 27.355 19.793
15.046
11.925
9.770
8.244
7.105
6.233
5.548
4.997
4.544
3.846
3.571
3.333
3.125
2.500 Period 40
Payments (or receipts) at the end of each period.
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