Mini-Exercise 16-8 (Algo) Payback period and accounting rate of return LO 16-9, 16-10Lakeside Incorporated is considering replacing old production equipment with state-of-the-art technology that will allow productioncost savings of $10,000 per month. The new equipment will have a five-year life and cost $450,000, with an estimated salvage valueof $40,000 Lakeside's cost of capital is 9%. Lakeside Incorporated uses a straight-line depreciation method.Required:Calculate the payback period and the accounting rate of return for the new production equipment.Note: Round your answers to 2 decimal places.Payback periodAccounting rate of return3.75 years

The payback period, a monetary metric, estimates how long it will take an investment to recover its…

Answered: Mini-Exercise 16-8 (Algo) Payback…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 12PROB

See similar textbooks

Similar questions

Required information Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] Project A requires a $380,000 initial investment for new machinery with a five-year life and a salvage value of $39,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $23,000 per year for the next five years. QS 25-6 Accounting rate of return LO P2 Compute Project A's accounting rate of return. Accounting Rate of Return Choose Numerator: Choose Denominator: = Accounting Rate of Return Accounting rate of return
1 Jlgu übja 1 Flint Systems is considering investing in production- management software that costs $630,000, has $67,000 residual value, and leads to cost savings of $1,650,000 per year over its five-year life. Calculate the average amount invested in the asset that should be used for calculating the accounting rate of return $697,000 .A $348,500 .B O $67,000 .c O $630,000 .D
Required information Problem 14.056 The two machines shown are being considered for a chip manufacturing operation. Assume the MARR is a real return of 14% per year and that the inflation rate is 6.7% per year. A B Machine First Cost, $ -146,000 -820,000 -5,000 -70,000 M&O, $ per year Salvage Value, $ 40,000 200,000 Life, years 5 00 Problem 14.056.a: Compare two alternatives based on their AW values without inflation consideration Which machine should be selected on the basis of an annual worth analysis if the estimates are in constant-value dollars? What is the annual worth of the selected alternative? Select machine (Click to select]: wwwwwwwwwwww wwwwww... The annual worth of the alternative is $
Question 1 Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 8300 2 9200 3 10400 4 9800 5 8400 Production of the implants will require GH¢ 150,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales for that year. In the final year of the project, net working capital will decline to zero as the project is wound down. In other words, the investment in working capital is to be completely recovered by the end of the project’s life. Total fixed costs are GH¢ 240,000 per year, variable production costs are GH¢ 190 per unit, and the units are priced at GH¢ 345 each. The equipment needed to begin production has an installed cost of GH¢ 2,300,000. Because the implants are intended for professional singers, this equipment depreciated using the straight-line basis. In five years, this equipment…
QUESTION ONEETM Co is considering investing in machinery costing K150,000 payable at the start of firstyear. The new machine will have a three-year life with K60,000 salvage value at the end of 3 years. Other details relating to the project are as follows.Year 1 2 3 Demand (units) 25,500 40,500 23,500 Material cost per unit K4.35 K4.35 K4.35 Incremental fixed cost per year K45,000 K50,000 K60,000Shared fixed costs K20,000 K20,000 K20,000The selling price in year 1 is expected to be K12.00 per unit. The selling price is expected to rise by 16% per year for the remaining part of the project’s life.Material cost per unit will be constant at K4.35 due to the contract that ETM has with its suppliers. Labor cost per unit is expected to be K5.00 in year 1 rising by 10% per year beyond the first year. Fixed costs (nominal) are made of the project fixed cost and a share of head office overhead. Working capital will be…
6.7 Project Evaluation Your firm is contemplating the purchase of a new $575,000 com-puter based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $60,000 at the end of that time. You will save $176,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $80,000 (this is a one-time reduction). If the tax rate is 23 percent, what is the IRR for this project?
Q1 Bongaigaon Refineries wishes to install an air pollution control system in its facility situated in Assam. The system comprises of four types of equipments that involve capital investment and annual recurring costs as given in Table 6.1. Assume a useful life of 10 years for each type of equipment, no salvage value and that the company wants a minimum return of 10% on its capital. Which equipment should be chosen? Table 6.1 Costs for four equipments Investment () Annual recurring costs: Power () Labor (2) Maintenance (2) Taxes and insurance () Total annual recurring costs() A 2,00,000 Equipments B C 2,76,000 3,00,000 D 3,25,000 64,000 59,000 36,000 28,000 1,20,000 1,36,000 1,84,000 1,96,000 96,000 64,000 22,000 10,000 50,000 54,000 68,000 72,000 3,30,000 3,13,000 3,10,000 3,06,000
Home NPV for varying costs of capital LePew Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $320,000 and will generate after-tax cash inflows of $62,650 per year for 8 years. If the cost of capital is 14%, calculate the net present value (NPV) and indicate whether to accept or reject the machine. The NPV of the project is $ (Round to the nearest cent.) ments Plan ts on eText media Librai ncial Calculat oter Resource Enter your answer in the answer box and then click Check Answer. amic Study ules 1 part remaining Clear All Check Answer nmunication Tools > Question 9 (0/1) Question 10 (0/1) Question 11 (0/1) Ouestion 12 (0/1) O Type here to search inse
Operating cach Inflows Afirm is considerin enewing its equipment to meet increased d ad demand for its product. The cost of equipment modifications is $1.99 million plus $100,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table 1). Additional sales revenue from the renewal should amount to $1.27 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 36% of the additional sales. The firm is subject to a tax rate of 40%. (Note: Answer the following questions for each of the next 6 years.) ult from the renewal? What incremental eamings before depreciation, interest, and taxes will result fr What after taxes will result from the renewal? Al not opening pr a. What incremental operating cash inflows w result from the a. The incremental profits before depreciation and tax are $ (Round to the nearest dollar.) b. Calculate the incremental net…
Project Description Initial Cost Annual Revenue ($1000s) ($1000s) $44 A Replace equipment to reduce labor costs 200 B. Overhaul equipment to 150 $36 reduce material costs Replace Equipment to reduce defective parts Change packaging to reduce shipping costs 120 $29 D 100 $25 ACME, Inc. is evaluating four proposals to increase their earnings. The initial costs and annual revenues are shown in the table below. If they have $300,000 in capital available to invest in these projects, what would ACME's rate of return be if they pursued Project A? Assume a common study period of 10 years. Show all work.
Engineering economy - ENGR 3322 A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately $18,000 per year over the six-year study period. At MARR of 19%, calculate the internal rate of return of the project a. 7% b. 8% c. 9% d. None of the choices

Recommended textbooks for you

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS