Exercise 14-8 (Static) Payback Period and Simple Rate of Return [LO14-1, LO14-6] [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 $300,000, have an eight-year useful life, and have a total salvage value of $20,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $200,000 Less operating expenses: Commissions to amusement houses $100,000 7,000 35,000 18,000 Insurance Depreciation Maintenance 160,000 Net operating income $ 40,000 Exercise 14-8 Part 1 (Static) Required: la. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Ic., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?

Exercise 14-8 (Static) Payback Period and Simple Rate of Return [LO14-1, LO14-6] [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 $300,000, have an eight-year useful life, and have a total salvage value of $20,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $200,000 Less operating expenses: Commissions to amusement houses $100,000 7,000 35,000 18,000 Insurance Depreciation Maintenance 160,000 Net operating income $ 40,000 Exercise 14-8 Part 1 (Static) Required: la. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Ic., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 11PROB

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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…
E7.7 (LO 3, 4), AP Shruti Shrills is considering an expansion of one of its existing buildings to add more manufacturing space for its kid-friendly noisemakers. Several possible scenarios exist for future cash flows, as follows. 1. Construction costs of $500,000; steady sales and costs each year, netting to an annual operating cash inflow of $70,000; the expansion would have no salvage value at the end of its 10-year useful life (the building would be repurposed for a different product).2. Construction costs of $500,000; rising and then falling net cash flows each year for 10 years, as follows: $50,000 for the first 2 and last 2 years, $175,000 for years 3–5, and $100,000 for years 6–8.3. Construction costs of $700,000; no cash flows in year 1, $75,000 in years 2 and 3, $150,000 in year 4, $100,000 in years 5–8, and $50,000 in the last 2 years.Required 1. Calculate the simple payback period for all three scenarios.2. Assume that Shruti will only accept investments with a payback period…
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?
V14 Steadman Company is considering an investment in a new machine for an independent five-year project. The machine’s cost is $837,500 with no salvage value at the end of five years. Net cash inflows from the project are expected to be $252,500 annually. Steadman would depreciate the machine using the MACRS schedule, and the machine qualifies as a 5-year asset. Steadman uses a discount rate of 8%, and its tax rate is 30%. Required: 1. Determine the after-tax net income and after-tax cash flows from the investment. Refer to Exhibit 12.4 for the 5-year MACRS deprecation schedule. 2. Determine the NPV of the project. 3. Determine the IRR of the project. 4. Determine the payback period of the project, assuming that cash flows occur evenly in each year. 5. Determine the book (accounting) rate of return using both (a) the initial investment as the denominator and (b) the average book value of the investment as the denominator.
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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?
13- Evaluate the following statements about NPV and IRR. I. Majed said, “NPV increases as discount rate decreases”. II. Nesrin said, “IRR increases as discount rate decreases”17- CBA Elevator costs $50,000 with an expected life of 5 years.The elevator will be depreciated on a straight-line basis to an expected salvage value of zero. The annual operating costs are $8,000.Applicable tax rate is 30% and required rate of return is 10.0%. What is the net present value of the elevator?
12. Chuck Company operates an oil platform at the Pacific Ocean. An oil platform was built by the Company at a cost of P25,000,0000 on January 1, 2011, the present value of expected restoration costs at that time was P5,000,000. The oil platform has an estimated useful life of 20 years, with no residual value. On December 31, 2020, the Company was offered P18,000,000 to sell the platform. The selling costs would be P2,500,0000. The value in use of the platform is P13,000,000. How much is the impairment loss for the year 2020? Group of answer choices 2,500,000 500,000 None 2,000,000
A company has purchased a machine (CCA rate 24%) at $300,000 and has a tax rate of 33.00%. By how much will the NPV change if the company is able to obtain a $13,000 salvage value for its machine at the end of the project's life in Year 4? Assume a discount rate of 11.20% and that all else remains the same. Question 10Answer a. $8,502 b. $10,415 c. -$1,913 d. $6,589 e. $10,075