Exercise 12-8 Payback Period and Simple Rate of Return [LO12-1, LO12-6][The following information applies to the questions displayed below.]Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The gameswould cost a total of $300,000, have an eight-year useful life, and have a total salvage value of $20,000. The companyestimates that annual revenues and expenses associated with the games would be as follows:Revenues$200,000Less operating expenses:Commissions to amusement houses$100,000Insurance7,000Depreciation35,000Maintenance18,000160,000Net operating income$ 40,000 Exercise 12-8 Part 1Required:1a. Compute the payback period associated with the new electronic games.1b. Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Wouldthe company purchase the new games?Complete this question by entering your answers in the tabs below.Req 1AReq 1BCompute the payback period associated with the new electronic games.Payback periodyears<Reg 1AReq 1B >

Payback period refers to the period within which the sum invested by the company in a project will…

Exercise 12-8 Part 1 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?

Exercise 12-8 Part 1 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 16P: REPLACEMENT CHAIN The Fernandez Company has an opportunity to invest in one of two mutually...

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REPLACEMENT CHAIN The Fernandez Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next eight years. Machine A costs 10 million but will provide after-tax inflows of 4 million per year for 4 years. If Machine A were replaced, its cost would be 12 million due to inflation and its cash inflows would increase to 4.2 million due to production efficiencies. Machine B costs 15 million and will provide after-tax inflows of 3.5 million per year for 8 years. If the WACC is 10%, which machine should be acquired? Explain.
Exercise 12-8 (Algo) Payback Period and Simple Rate of Return [LO12-1, LO12-6] Skip to question [The following information applies to the questions displayed below.] Nick’s Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 300,000 Less operating expenses: Commissions to amusement houses $ 90,000 Insurance 72,000 Depreciation 23,520 Maintenance 40,000 225,520 Net operating income $ 74,480 Exercise 12-8 Part 2 (Algo) 2a. Compute the simple rate of return promised by the games. Simple rate of return % (Round to one decimal place) 2b. If the company requires a simple rate of return of at least 12%, will the games be purchased? Yes or no?
Required information Exercise 12-8 (Algo) Payback Period and Simple Rate of Return [LO12-1, LO12-6] [The following information applies to the questions displayed below.] Nick’s Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 300,000 Less operating expenses: Commissions to amusement houses $ 90,000 Insurance 72,000 Depreciation 23,520 Maintenance 40,000 225,520 Net operating income $ 74,480 Exercise 12-8 Part 1 (Algo) Required: 1a. Compute the payback period associated with the new electronic games. Payback period (answer in years) 1b. Assume that Nick’s Novelties, Incorporated, will not purchase new games unless they provide a payback period of…
Required information Exercise 13-8 Payback Period and Simple Rate of Return [LO13-1, LO13-6] [The following information applies to the questions displayed below.] Nick’s Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $332,000, have a fifteen-year useful life, and have a total salvage value of $33,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 280,000 Less operating expenses: Commissions to amusement houses $ 80,000 Insurance 57,000 Depreciation 19,920 Maintenance 60,000 216,920 Net operating income $ 63,080 Required: 1a. Compute the pay back period associated with the new electronic games. 1b. Assume that Nick’s Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase…
Required information Exercise 13-8 Payback Period and Simple Rate of Return [LO13-1, LO13-6] [The following information applies to the questions displayed below.] Nick’s Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $332,000, have a fifteen-year useful life, and have a total salvage value of $33,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 280,000 Less operating expenses: Commissions to amusement houses $ 80,000 Insurance 57,000 Depreciation 19,920 Maintenance 60,000 216,920 Net operating income $ 63,080 Garrison 16e Rechecks 2017-05-22 Exercise 13-8 Part 2 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 12%, will the games be purchased?
Exercise 14-6 (Algo) Simple Rate of Return Method [LO14-6] The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $57,000. The machine would replace an old piece of equipment that costs $15,000 per year to operate. The new machine would cost $7,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a salvage value of $24,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.)
Required information Exercise 14-8 (Algo) Payback Period and Simple Rate of Return [LO14-1, LO14-6] Skip to question [The following information applies to the questions displayed below.] Nick’s Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $320,000, have a fifteen-year useful life, and have a total salvage value of $32,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 230,000 Less operating expenses: Commissions to amusement houses $ 80,000 Insurance 20,000 Depreciation 19,200 Maintenance 50,000 169,200 Net operating income $ 60,800 Exercise 14-8 Part 1 (Algo) Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick’s Novelties, Incorporated, will not purchase new games unless they provide a payback period of five years or less.…
Required information Exercise 14-8 (Algo) Payback Period and Simple Rate of Return [LO14-1, LO14-6] Skip to question [The following information applies to the questions displayed below.] Nick’s Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $320,000, have a fifteen-year useful life, and have a total salvage value of $32,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 230,000 Less operating expenses: Commissions to amusement houses $ 80,000 Insurance 20,000 Depreciation 19,200 Maintenance 50,000 169,200 Net operating income $ 60,800 Exercise 14-8 Part 2 (Algo) 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 14%, will the games be purchased?
Exercise 14-2 (Algo) Net Present Value Analysis [LO14-2] The management of Kunkel Company is considering the purchase of a $21,000 machine that would reduce operating costs by $5,000 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required rate of return is 12%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
Problem 11-06New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,140,000, and it would cost another $23,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $547,000. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $381,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%. What is the Year 0 net cash flow?$ What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1 $ Year 2 $ Year 3 $ What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round…
OLA#10.4 A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $520,000 today, after which, it would have to spend $8,000 every year starting one year from now, for eight years. At the end of the period, the machine would have a salvage value of $13,000. The company confirmed that it can produce and sell 8,900 components every year for eight years and the net return would be $12.70 per component. The company's required rate of return is 7.00%. a. What is the Net Present Value (NPV) of this investment option? b. Is the investment option feasible? Yes No Kindly use all the decimals DO NOT ROUND
OLA #10.4 A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $520,000 today, after which, it would have to spend $8,000 every year starting one year from now, for eight years. At the end of the period, the machine would have a salvage value of $13,000. The company confirmed that it can produce and sell 8,900 components every year for eight years and the net return would be $12.70 per component. The company's required rate of return is 7.00%. a. What is the Net Present Value (NPV) of this investment option? b. Is the investment option feasible? Yes No Please reply using algebra in details