MNO company is evaluating a proposal for purchase of equipment which will cost $180,000. The cash inflows from the use of equipment is given below: Year Cash flow $60,000 $40,000 $70,000 $125,000 $35,000 1 Payback period for the proposal is: a. 3 years b. 2 years с. 4 years d. 3.08 years 2345

MNO company is evaluating a proposal for purchase of equipment which will cost $180,000. The cash inflows from the use of equipment is given below: Year Cash flow $60,000 $40,000 $70,000 $125,000 $35,000 1 Payback period for the proposal is: a. 3 years b. 2 years с. 4 years d. 3.08 years 2345

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 19E

See similar textbooks

Related questions

Q: A company is considering investing in one of two projects for a period of three years. Information…

Q: company is evaluating a proposal for purchase of equipment which will cost $180,000. The cash…

A: Introduction Payback period: It is the method of capital investment evaluation. This method counts…

Q: 2. Calculate Kathy Short's IRR. Round your answer to the nearest percent. 3. What should be Elmo…

A: The Internal Rate of Return (IRR) is a financial analysis technique which helps in determining and…

Q: A company is considering two projects. Project A Project B Initial investment $200,000 $200,000 Cash…

A: The Payback Period is one of the traditional techniques of capital budgeting that does not take into…

Q: Vista Limited intends purchasing a new machine and has a choice between the following two machines:…

A: Since you have asked a question with multiple parts, we will solve the first 3 parts for you. Please…

Q: The management of Nebraska Corporation is considering the purchase of a new machine costing…

A: Average rate of return is the average cash flow that an investment is likely to provide in each year…

Q: ABC, Inc. purchased an equipment at time=0 for $135,077. The shipping and installation costs were…

A: Calculation of Cash Flow in Year 4:The cash flow in year 4 is $123,123.96.Excel Spreadsheet:

Q: ABC, Inc. purchased an equipment at time=0 for $84,362. The shipping and installation costs were…

A: Calculation of Cash Flow in Year 3:The cash flow in year 3 is $64,637.16.Excel Spreadsheet:

Q: Beyer Company's is considering the purchase of an asset for $205,000. It is expected to produce the…

A: The net present value method is used to evaluate investment projects. We can evaluate the project by…

Q: A company is considering a machine acquisition. The new machine will cost $ 60.000 and the shipping…

A: Investment Cash flow:- It includes inflow and outflow of cash from the sale and purchase of…

Q: Cedar Ltd has details of two machines which fulfil the company’s future production plans. Only one…

A: The question is based don the concept of Project valuation

Q: Berry Products is considering two pieces of machinery. The first machine costs P50,000 more than the…

A: When the present value of both the machines would be the same, that discount rate would be…

Q: A company is considering two projects. Project I Project II Initial investment $200,000 $200,000…

A: The payback period can be calculated as the number of years it will take for a project to recover…

Q: Oriental Corporation has gathered the following data on a proposed investment project: Investment in…

A: The payback period is the time taken to pay back the investment. In simple words, it is the time…

Q: Aliara Corporation is considering purchasing one of two new machines. Estimates for each machine are…

A: Net Present Value- The net present value or net present worth applies to a sequence of cash flows…

Q: The net present value would be? ₱ 188,806 ₱ 324,989 ₱ 212,550 ₱ 299,250 ₱ 126,700 ₱ 258,684

A: Net Present Value: It is a metric used in capital budgeting to value the project's worth. Net…

Q: MNO company is evaluating a proposal for purchase of equipment which will cost S180,000. The cash…

A: Initial investment is $180,000 (Purchase cost of equipment) Year Cash inflows…

Q: Compute the present equivalent cost of the equipment using 10% interest. (capitalized cost)

A: Present Worth: It is the present value of the discounted cashflows for a period of time.…

Q: Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated…

A: Introduction: The net present value (NPV) analysis determines the current worth of a stream of…

Q: ABC Company is making a decision whether to invest in a new released equipment for their…

A: The difference between the current value of cash inflows and outflow over a period of time is known…

Q: Home Express Moving Company is considering purchasing new equipment that costs $728.000. s…

A: Present Value: The present value (PV) of a future amount of money or stream of cash flows is the…

Q: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated…

A: Particulars Year Amount PVF @8% Present Value Operating cash flows 1 17000 0.926…

Q: Beyer Company is considering the purchase of an asset for $210,000. It is expected to produce the…

A: Payback period is the period within which the company recovers its investment amount in a project.

Q: Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated…

A: Net Present Value(NPV) is excess of PV of inflows over PV of outflows related to investment proposal…

Q: Kiwanda limited is considering the purchase of a new machine. Two alternatives machines, A and B,…

A: Using excel for calculation and IRR FUNCTION

Q: A company that manufactures magnetic membrane switches is investigating two production options that…

A: The future worth analysis is a kind of quantitative analysis that helps in evaluating the capital…

Q: Tesla Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These…

A: Replacement Decision in financial management refers to change in an existing asset with one similar…

Q: An equipment costing ₱600,000, with a residual value of ₱30,000 at its useful life of five years, is…

A: Net Present Value(NPV) is amongst one of the modern techniques of capital budgeting which considers…

Q: Beyer Company is considering the purchase of an asset for $240,000. It is expected to produce the…

A: calculation of payback period are as follows

Q: "he management of Nebraska Corporation is considering the purchase of a new machine costing…

A: ARR: It is that rate of return that is anticipated from an asset or any other investment in relation…

Q: Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment.…

A: a) The profitability index (PI), then again alluded to as the value investment ratio (VIR) or profit…

Q: The management of NUBD Co. is considering the purchase of a new machien costing P400,000 with a…

A: Average rate of return or accounting rate of return is technique in capital budgeting which is used…

Q: A company is considering the purchase of equipment for $270,000. Projected annual cash inflow from…

A: Payback period: It can be defined as the time that is usually taken by an investment before it…

Q: An equipment costing ₱600,000, with a residual value of ₱30,000 at its useful life of five years, is…

A: Year Cash flow 0 -600000 1 350000 2 250000 3 150000 4 100000 5 80000 Discount rate…

Q: Bell Manufacturing Inc. is considering the replacement of one of its old drill presses. Three…

A: we will only answer the first three subparts . For the remaining subparts kindly resubmit the…

Q: Harper Corporation has the following information about the purchase of a new piece of equipment:…

A: Gross profit is $50,000 per year Cost of equipment is $130,000 Salvage value at the end of the 8 th…

Q: The information below relates to the purchase of equipment: investment in the project: $10,000 Net…

A: Capital budgeting is a financial technique that helps to evaluate long-term capital projects that…

Q: ABTS Co Ltd is considering the purchase of a new machine. Two alternative machines (A and B) have…

A: Payback Period is calculated as below: Here, A = Last period or year in which the cumulative cash…

Q: Bunnings Ltd is considering to invest in one of the two following projects to buy new equipment.…

A: The discounted payback period is the time period in which the project will be able to generate…

Q: Beyer Company is considering the purchase of an asset for $245,000. It is expected to produce the…

A: Net present Value Method is a process to justify whether the business is avail to recover its cost…

Q: A company is investigating two production options of the manufactured switches that have the…

A: For Present worth analysis, net present value is calculated. NPV is present value of inflows less…

Q: Azimuth Company was considering the purchase of equipment. Details on the equipment are as follows:…

Q: The management of XYZ Beverage Company is considering to purchase a new equipment to increase the…

A: Payback period: It can be defined as the time that is taken by an investment before it starts…

Q: The management of XYZ Beverage Company is considering to purchase a new equipment to increase the…

A: Annual Net cash inflows = Annual cash inflows - (Cost of ingredients + Salaries expense +maintenance…

Q: RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows:…

A: PV is the current worth of cash flows that are expected to occur in the future.

Q: repare a schedule that shows the applicable cash flows and other relevant items for this decision…

A: Payback Period: It is the period in which the cost of the investment/project is recovered. The…

Q: The engineers at a design firm have been tapped by an amusement park to design a water sports ride.…

A: Present worth is the present value of cash flows that are expected to occur in the future.

Q: The following data are accumulated by Lingle Company in evaluating the purchase of $180,000 of…

A: Calculate net present value : given purchase price of equipment = $180,000 the required rate of…

Q: Bell Manufacturing Inc. is considering the replacement of one of its old drill presses. Three…

A: Note : As per Bartleby guidelines, we can only answer up to 3 subparts. Please post remaining…

Question

MNO company is evaluating a proposal for purchase of equipment which will cost
$180,000. The cash inflows from the use of equipment is given below:
Year
Cash flow
$60,000
$40,000
$70,000
$125,000
$35,000
4.
Payback period for the proposal is:
a. 3 years
b. 2 years
c. 4 years
d. 3.08 years
DELL
123 45

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
Determine cash flows Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 5,000 units at 18 each. The new manufacturing equipment will cost 120,000 and is expected to have a 10-year life and a 17,000 residual value. Selling expenses related to the new product are expected to be 3% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Determine the net cash flows for the first year of the project, Years 29, and for the last year of the project.
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?
Net present value method for a service company Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for 70,000 on January 1, 20Y1. The truck is expected to have a five-year life with an expected residual value of 15,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be 65,000 per year for each of the next five years. A driver will cost 40,000 in 20Y1, with an expected annual salary increase of 2,000 for each year thereafter. The annual operating costs for the truck are estimated to be 6,000 per year. a. Determine the expected annual net cash flows from the delivery truck investment for 20Y120Y5. b. Compute the net present value of the investment, assuming that the minimum desired rate of return is 12%. Use the present value table appearing in Exhibit 2 of this chapter. c. Is the additional truck a good investment based on your analysis? Explain.
An investment of 1,000 produces a net cash inflow of 500 in the first year and 750 in the second year. What is the payback period? a. 1.67 years b. 0.50 year c. 2.00 years d. 1.20 years e. Cannot be determined
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Cash payback period for a service company Janes Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of 975,000 and each with a seven-year life and expected total net cash flows of 1,050,000. Location 1 is expected to provide equal annual net cash flows of 150,000, and Location 2 is expected to have the following unequal annual net cash flows: Determine the cash payback period for both location proposals.
Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries (the manufacturer) has agreed to accept $23,500 at the end of each of the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan? A. $94,000 B. $80,000 C. $23,500 D. $14,000