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ensen uses straight-line depreciation. The net cash inflow is expected to be $150,000 each year for discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation r cluding built-in functions for NPV, IRR, and MIRR), compute the following for the above-reference ler the assumption that cash inflows occur evenly throughout the year. Round your answer to 1 deci ears). ate of return based on (a) initial investment and (b) average investment. Round both answers to 1 o 4%)

ensen uses straight-line depreciation. The net cash inflow is expected to be $150,000 each year for discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation r cluding built-in functions for NPV, IRR, and MIRR), compute the following for the above-reference ler the assumption that cash inflows occur evenly throughout the year. Round your answer to 1 deci ears). ate of return based on (a) initial investment and (b) average investment. Round both answers to 1 o 4%)

Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter11: The Basics Of Capital Budgeting
Section: Chapter Questions
Problem 8P
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12-49 Basic Capital Budgeting Techniques; No Taxes, Uniform Net Cash Inflows; Spreadsheets Bob Jensen Inc. purchased a $650,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. To encourage capital investments, the government has exempted taxes on profits from new investments. This legislation is to be in effect for the foreseeable future. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net cash inflow is expected to be $150,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation rules do not аpply. Required Using Excel (including built-in functions for NPV, IRR, and MIRR), compute the following for the above-referenced investment: 1. The payback period, under the assumption that cash inflows occur evenly throughout the year. Round your answer to 1 decimal place (e.g., 4.581 years = 4.6 years). 2. The accounting (book) rate of return based on (a) initial investment and (b) average investment. Round both answers to 1 decimal place (e.g., 23.418% = 23.4%). %3| 3. The net present value (NPV) of the proposed investment under the assumption that cash inflows occur at year-end. Round your answer to nearest whole dollar.
Transcribed Image Text:12-49 Basic Capital Budgeting Techniques; No Taxes, Uniform Net Cash Inflows; Spreadsheets Bob Jensen Inc. purchased a $650,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. To encourage capital investments, the government has exempted taxes on profits from new investments. This legislation is to be in effect for the foreseeable future. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net cash inflow is expected to be $150,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation rules do not аpply. Required Using Excel (including built-in functions for NPV, IRR, and MIRR), compute the following for the above-referenced investment: 1. The payback period, under the assumption that cash inflows occur evenly throughout the year. Round your answer to 1 decimal place (e.g., 4.581 years = 4.6 years). 2. The accounting (book) rate of return based on (a) initial investment and (b) average investment. Round both answers to 1 decimal place (e.g., 23.418% = 23.4%). %3| 3. The net present value (NPV) of the proposed investment under the assumption that cash inflows occur at year-end. Round your answer to nearest whole dollar.
4. The present value payback period, in years, of the proposed investment under the assumption that cash inflows occur evenly throughout the year. (Note: Because of this assumption, the present value calculations will be approximate, not exact.) To calculate present value amounts, use the appropriate factors from L Appendix C, L Table 1. Round your answer to 1 decimal place. For example, 3.481 years = 3.5 years. 5. The internal rate of return (IRR), rounded to 1 decimal place (e.g., 13.612% = 13.6%). Page 0527 6. The modified internal rate of return (MIRR), rounded to 1 decimal place. (In conjunction with this requirement, you might want to consult either of the following two references: https://support.office.com/en-us/Search/results?query=mirr+function&src=as and/or www.journalofaccountancy.com/issues/2017/feb/calculate-internal-rate-of-return-in-excel.html.)
Transcribed Image Text:4. The present value payback period, in years, of the proposed investment under the assumption that cash inflows occur evenly throughout the year. (Note: Because of this assumption, the present value calculations will be approximate, not exact.) To calculate present value amounts, use the appropriate factors from L Appendix C, L Table 1. Round your answer to 1 decimal place. For example, 3.481 years = 3.5 years. 5. The internal rate of return (IRR), rounded to 1 decimal place (e.g., 13.612% = 13.6%). Page 0527 6. The modified internal rate of return (MIRR), rounded to 1 decimal place. (In conjunction with this requirement, you might want to consult either of the following two references: https://support.office.com/en-us/Search/results?query=mirr+function&src=as and/or www.journalofaccountancy.com/issues/2017/feb/calculate-internal-rate-of-return-in-excel.html.)
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