Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,300,000 $992,000 2 1,300,000 992,000 3 1,300,000 992,000 4 1,300,000 992,000 5 1,300,000 992,000 Required: Compute the NC equipment’s ARR. Enter as a percent and round your answer to one decimal place. Accounting rate of return =
Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,300,000 $992,000 2 1,300,000 992,000 3 1,300,000 992,000 4 1,300,000 992,000 5 1,300,000 992,000 Required: Compute the NC equipment’s ARR. Enter as a percent and round your answer to one decimal place. Accounting rate of return =
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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Payback, Accounting
Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow:
| Year | Cash Revenues | Cash Expenses |
| 1 | $1,300,000 | $992,000 |
| 2 | 1,300,000 | 992,000 |
| 3 | 1,300,000 | 992,000 |
| 4 | 1,300,000 | 992,000 |
| 5 | 1,300,000 | 992,000 |
Required:
Compute the NC equipment’s ARR. Enter as a percent and round your answer to one decimal place.
Accounting rate of return =
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