determine the average annual income.
Q: An asset that costs $3 million dollars will be depreciated to a zero book value across a 12 year…
A: Deprecation would be charge on useful life of Assets. There are two method of deprecation SLM &…
Q: BAM Co. is evaluating a project requiring a capital expenditure of $806,250. The project has an…
A: Average rate of return = Average annual income / Average investment Average annual income = Total…
Q: what is the projects equivalent annual cost, or EAC?
A:
Q: An 8 year project is estimated to cost 336000 and have no residual value. If the straight line…
A: Given: Cost = 336,000 Average rate of return = 13%
Q: A project has an initial requirement of $261,000 for fixed assets and $27,000 for net working…
A: Net present value is the difference between present value of future cash inflow minus present value…
Q: A five-year project has an initial fixed asset investment of $345,000, an initial NWC investment of…
A: Given: Particulars Amount Initial fixed investment -$345,000 Initial working capital -$25,000…
Q: A bulldozer was bought for ₱ 0.50M and have an estimated useful life of 10 years after which it will…
A: Straight-line depreciation expense=Cost of Asset-Scrap ValueUseful Life
Q: An eight-year project is estimated to cost $416,000 and have no residual value. If the straight-line…
A: Estimated annual net income = Average investment * Average rate of return
Q: An 8-year project is estimated to cost $352,000 and have no residual value. If the straight-line…
A: Average investment = (Cost + Residual value) /2 = ($352,000 + 0) / 2 = $176,000
Q: What is the minimum annual revenue to make this project profitable
A: Given Cost = 379,968 annual operating cost = 167,365 project life = 10 years salvage cost = 12,887…
Q: A project has an initial cost of $16,780 and a 3-year life. The company uses straight-line…
A: Average Accounting Return: The average accounting return (ARR) is the method of determining the…
Q: A five-year project has an initial fixed asset investment of $280,000, an initial NWC investment of…
A: Equivalent Annual Cost (EAC) is the cost of owning an asset. It is used as an important tool for…
Q: A project under consideration costs $750,000, has a five-year life and has no salvage…
A: Here, Cost of the project = $750,000 Useful life =5 years Depreciation = Straight-Line Salvage value…
Q: Dickerson Co. is evaluating a project requiring a capital expenditure of $810,000. The project has…
A: This question is related to Capital Budgeting of Financial Management. In this question, we have…
Q: An 8-year project is estimated to cost $336,000 and have no residual value. If the straight-line…
A: Average rate of return = Average annual income / Average investment where, Average annual income =…
Q: We are evaluating a project that costs $660,000, has a life of 5 years, and has no salvage value.…
A: Cash flows are the series of payment of the income received over the period of time on the initial…
Q: What is the accounting break even quantity?
A: Given in the question: Selling Price Per unit = $515 per unit Variable Cost Per Unit = $420 per unit…
Q: An 8-year project is estimated to cost $528,000 and have no residual value. If the straight-line…
A:
Q: Harris Co. is considering a 12-year project that is estimated to cost $900,000 and has no residual…
A: In this question, we have to calculate the average annual income we have the formula of Average…
Q: An 8-year project is estimated to cost $528,000 and have no residual value. If the straight-line…
A: Average Rate of Return: Average rate of return is a method that measures the average earnings of a…
Q: Cardinal Company is considering a five-year project that would require a $2,890, useful life of five…
A: Solution: "Depreciation expense" on the income statement will not effect cash flows.
Q: Compute the net present value of each project. (Enter negative amounts using either a negative sign…
A: Payback period is the time period it takes for company to recover the amount invested in the…
Q: An 8-year project is estimated to cost $496,000 and have no residual value. If the straight-line…
A: Average investment = (Beginning investment + Ending investment)/2
Q: Determine the average rate of return for a project that is estimated to yield total income of…
A: Introduction:- Average Rate of Return measures profitability of the investment. It is used in…
Q: An asset in the five-year MACRS property class cost $100,000 and has a zero estimated salvage value…
A: Present worth is the worth in current time of the amount which is expected to be received in some…
Q: The amount of the average investment for a proposed investment of $115,000 in a fixed asset with a…
A: Average Rate of Return = Annual Return / Average Investment
Q: A project produces annual net income of $15,250, $18,700, and $21,750 over three years,…
A: The average accounting rate of return is calculated as ratio of average income over life of project…
Q: We are evaluating a project that costs $907,000, has an 14-year life, and has no salvage value.…
A: Solution 1- A Sales = 94000 units Fixed cost =916070 Contribution per unit= sales unit - variable…
Q: A 5-yr project has an initial requirement of $100,415 for new equipment and $8,944 for net working…
A: Calculation of Net Present Value:The net present value is $185,513.41.Excel Spreadsheet:
Q: CJN Corporation is evaluating a project requiring a capital expenditure of $806,250. The project has…
A: Average Rate of Return is given by the formula: Average Rate of Return= Average Net Earnings /…
Q: Clemson Software is considering a new project whose data are shown below. The required equipment…
A: Straight-Line Method is used to compute depreciation on fixed asset where equal depreciation for…
Q: The expected average rate of return for a proposed investment of $44,000 in a fixed asset using…
A: Calculate average rate of return.
Q: The new delivery truck is worth a total of Php 7.4M, with a residual value after 8 years is Php…
A: In a diminishing balance method of depreciation, higher depreciation is charged in the initial years…
Q: A project using passive heating/cooling design concepts to reduce energy costs requires an…
A: PW means PV of net benefits arises from the project in the future. It can be computed easily by…
Q: A machine costs $180,000 and will have an eight-year life, a $20,000 salvage value, and…
A: Accounting rate of return (ARR) for an investment can be calculated as follows:-
Q: GIVEN: Project C requires $800,000 net initial investment for new machinery with a 8-year life and a…
A: Initial Investment on machine = $800,000 Salvage Value = $40,000 Useful Life = 8 Years Straight Line…
Q: An 8-year project is estimated to cost $384,000 and have no residual value. If the straight-line…
A: Average investment amount is the average of initial investment and ending investment of the…
Q: A PROJECT IS ESTIMATED TO COST P 100,000.00, LASTS 8 YEARS, AND HAVE A P 10,000.00 SALVAGE VALUE.…
A: Investment income includes interest charges, dividends, capital appreciation earned from the sale of…
Q: ABC Company is considering investing in new production equipment at a cost of $60,000 with a 10-year…
A: The question is based on the concept of Financial Accounting.
Q: We are evaluating a project that costs RM604,000, has an 8-year life, and has no salvage value.…
A: Cash flows refer to the series of cash payments and receipts over the period of time. Net present…
Q: We are evaluating a project that costs RM604,000, has an 8-year life, and has no salvage value.…
A: Initial cost = $604000 Depreciation as per SLM = (604000 -0)/8 = 75500 Depreciation tax shield =…
Q: A 7-year project is expected to generate annual sales of 10,400 units at a price of $91 per unit and…
A: Formulas:
Q: A new project is expected to generate annual revenues of $114,500, variable costs of $73,600, and…
A: Annual revenue is $114,500. Annual variable cost is $73,600. Annual fixed cost is $14,000. Annual…
Q: Macrohard Software is considering a new project whose data are shown below. The equipment that would…
A: Operating cash flow means the total amount of cash flow generated by the company from its business…
Q: A 5-year project is estimated to cost $700,000 and have no residual value. If the straight-line…
A: Depreciation is an accounting method that spreads the cost of a measurable or physical asset over…
Q: A five-year project has an initial fixed asset investment of $300,000, an initial NWC investment of…
A: Equivalent annual cost (EAC) is the annual cost of owning and maintaining an asset determined by…
Q: An 8-year project is estimated to cost $368,000 and have no residual value. If the straight-line…
A: Average investment = (Beginning investment + Ending investment)/2
An 8-year project is estimated to cost $448,000 and have no residual value. If the
Step by step
Solved in 3 steps
- 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.The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?Wendys boss wants to use straight-line depreciation for the new expansion project because he said it will give higher net income in earlier years and give him a larger bonus. The project will last 4 years and requires 1,700,000 of equipment. The company could use either straight line or the 3-year MACRS accelerated method. Under straight-line depreciation, the cost of the equipment would be depreciated evenly over its 4-year life. (Ignore the half-year convention for the straight-line method.) The applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%, as discussed in Appendix 11A. The project cost of capital is 10%, and its tax rate is 25%. a. What would the depreciation expense be each year under each method? b. Which depreciation method would produce the higher NPV, and how much higher would it be? c. Why might Wendys boss prefer straight-line depreciation?
- Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?You are also considering another project that has a physical life of 3 years—that is, the machinery will be totally worn out after 3 years. However, if the project were terminated prior to the end of 3 years, the machinery would have a positive salvage value. Here are the project’s estimated cash flows: Using the 10% cost of capital, what is the project’s NPV if it is operated for the full 3 years? Would the NPV change if the company planned to terminate the project at the end of Year 2? At the end of Year 1? What is the project’s optimal (economic) life?Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.
- Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?Average rate of returncost savings Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of 125,000 with a 15,000 residual value and an eight-year life. The equipment will replace one employee who has an average wage of 28,000 per year. In addition, the equipment will have operating and energy costs of 5,150 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment.Taos Productions bought a piece of equipment for $79,860 that will last for 5 years. The equipment will generate net operating cash flows of $20,000 per year and will have no salvage value at the end of its life. What is the internal rate of return?
