Flynn Corporation is debating whether to purchase a new computerized production system. Tne system will cost $450,000, and have an estimated 10-year life with a salvage value of $70,00. The estimated operating results from the new production system are as follows: Incremental revenue.. $180,000 Incremental expenses:. Expenses other than depreciation.... $85,000 Depreciation (straight-line basis).. 38,000 (123.000) Incremental net income..... $57.000 All revenue and expenses other than depreciation will be received and paid in cash. Compute the following for this proposal: a. Annual net cash flow: $ b. Payback period: years с. Return on average investment: d. Net present value, discounted at an annual rate of 6% (present value of $1 due in 10 years, discounted at 6%, is 0.558; present value of $1 received annually for 10 years, discounted at 6%, is 7.360): $

Flynn Corporation is debating whether to purchase a new computerized production system. Tne system will cost $450,000, and have an estimated 10-year life with a salvage value of $70,00. The estimated operating results from the new production system are as follows: Incremental revenue.. $180,000 Incremental expenses:. Expenses other than depreciation.... $85,000 Depreciation (straight-line basis).. 38,000 (123.000) Incremental net income..... $57.000 All revenue and expenses other than depreciation will be received and paid in cash. Compute the following for this proposal: a. Annual net cash flow: $ b. Payback period: years с. Return on average investment: d. Net present value, discounted at an annual rate of 6% (present value of $1 due in 10 years, discounted at 6%, is 0.558; present value of $1 received annually for 10 years, discounted at 6%, is 7.360): $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 9P

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