Problem 5-3 (Algo) Analysis of alternatives [LO5-3, 5-8] Harding Company is in the process of purchasing several large pieces of equipment from Danning Machine Corporation. Several financing alternatives have been offered by Danning: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. Pay $1,120,000 in cash immediately. 2. Pay $401,000 immediately and the remainder in 10 annual installments of $90,000, with the first installment due in one year. 3. Make 10 annual installments of $150,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,670,000 five years from date of purchase. Required: Determine the best alternative for Harding, assuming that Harding can borrow funds at a 8% interest rate. (Round your final answers to nearest whole dollar amount.) X Answer is complete but not entirely correct. PV Option 1 $ 1,210,000 X Option 2 632,122 X Option 3 2$ 1,127,285 X Option 4 2$ 1,190,693 8 The best alternative for Harding Option 4

Problem 5-3 (Algo) Analysis of alternatives [LO5-3, 5-8] Harding Company is in the process of purchasing several large pieces of equipment from Danning Machine Corporation. Several financing alternatives have been offered by Danning: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. Pay $1,120,000 in cash immediately. 2. Pay $401,000 immediately and the remainder in 10 annual installments of $90,000, with the first installment due in one year. 3. Make 10 annual installments of $150,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,670,000 five years from date of purchase. Required: Determine the best alternative for Harding, assuming that Harding can borrow funds at a 8% interest rate. (Round your final answers to nearest whole dollar amount.) X Answer is complete but not entirely correct. PV Option 1 $ 1,210,000 X Option 2 632,122 X Option 3 2$ 1,127,285 X Option 4 2$ 1,190,693 8 The best alternative for Harding Option 4

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 12.2.2P: Differential analysis report for machine replacement proposal Catalina Tooling Company is...

See similar textbooks

Similar questions

E4 Use AW analysis. Texas Popcorn Corporation is planning to fully automate it process. The company CEO is currently looking into three options. Options A costs $450,000, AOC of $55,000, and salvage value of $85,000 after 3 years. Option B will cost $720,000 with an AOC of $68,000 and salvage of $95,000 after 4 years. Option C cost $800,000 with an AOC of $95,000 and salvage of $125,000 after 6 years. Which machine should the company select at an interest rate of 10% per year? Assume the project service life is 12 years. Use AW analysis to solve.
QUESTION 5Read the information below and answer the following questionsINFORMATIONThe management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each ofwhich requires an initial investment of R2 500 000. The following information is presented to you:PROJECT COS PROJECT TANNet Profit Net ProfitYear R R1 130 000 80 0002 130 000 180 0003 130 000 120 0004 130 000 220 0005 130 000 50 000A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method.5.4 Benefit Cost Ratio of Project Cos (expressed to three decimal places). 5.5 Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION.
#9 Issue: Linda Tristan, assistant controller for Ag-Growth, Inc., a biotechnology firm, has concerns about the accounting analysis for the firm’s purchase of a land site and building from Hylite Corporation. The price for this package purchase was $1,800,000 cash. A memorandum from the controller, Greg Fister, stated that the journal entry for this purchase should debit Land for $1,350,000, debit Building for $450,000, and credit Cash for $1,800,000. The building, a used laboratory facility, is to be depreciated over 10 years with a zero salvage value. The source documents supporting the transaction include two appraisals of the property, one done for Ag-Growth and one done for Hylite Corporation. The appraisal for Ag-Growth valued the land at $1,000,000 and the building at $500,000. The appraisal for Hylite Corporation (done by a different appraiser) valued the land at $1,500,000 and the building at $750,000. Negotiations between the two firms finally settled on an overall price…
E10.21 (LO3) (Government Grants) Rialto Group received a grant from the government of £100,000 to acquire £500,000 of delivery equipment on January 2, 2019. The delivery equipment has a useful life of 5 years. Rialto uses the straight-line method of depreciation. The delivery equipment has a zero residual value. Instructions A. If Rialto Group reports the grant as a reduction of the asset, answer the following questions. 1. What is the carrying amount of the delivery cquipment on the statement of financial position at December 31I, 2019? 2. What is the amount of depreciation expense related to the delivery equipment in 2020? 3. What is the amount of grant revenue reported in 2019 on the income statement? B. If Rialto Group reports the grant as deferred grant revenue, answer the following questions. 1. What is the balance in the deferred grant revenue account at December 31, 2019?…
Ch 5. ABC Company has the following mutually exclusive projects. Year Project A Project B 0 -$19,520 -$16,800 1 11,500 9,500 2 8,750 7,100 3 2,500 3,500 If the company uses the Profitability Index to rank these two projects, which project should be chosen if the appropriate discount rate is 15 percent? Group of answer choices Project B Both projects Project A Neither projects
P10–24 ALL TECHNIQUES, CONFLICTING RANKINGS Nicholson Roofing Materials Inc. is considering two mutually exclusive projects that both cost $150,000. The company’s board of directors has set a maximum four-year payback requirement, the cost of capital is 9%. The project cash flows appear below. a. Calculate the payback period for each project. b. Calculate the NPV of each project at 0%. c. Calculate the NPV of each project at 9%.
NEED ASAP!!! OWN SOLUTION NOT FROM OTHER SITES. THANKS The management of KC Company is considering the purchase of a $27.000 machine that would reduce operating costs by $7,000 per year. At the end of the machine's five-year useful life, it will have zero scrap value. The company's required rate of return is 12%. Determine the net present value of the investment in the machine. look for the attachment CHOICES: a) 30,917.8 b) 30,458.65 c) 29,352.6
Ch 5. ABC Company has the following mutually exclusive projects. Year Project A Project B 0 -$19,520 -$16,800 1 11,500 9,500 2 8,750 7,100 3 2,500 3,500 If the company uses the NPV method to rank these two projects, which project should be chosen if the appropriate discount rate is 15 percent? Group of answer choices Project A Project B
Answer is $105,952.53 , see Fully explain only in excel with correct explanation pls i need explanation and concept too pls definitely ill rate Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.35 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which it will be worthless. The project is estimated to generate $1,745,000 in annual sales, with costs of $655,000. The tax rate is 22 percent and the required return is 12 percent. What is the project's NPV? .
Q6) IBM networks want to modernize their networking system. Proposals have been received from two major software companies. The first proposal cost $6million but will raise the firm’s annual cash flows by $3million. The second proposal cost $7million and provides cash flow of $3.5million a year. Both projects have a life span of 3 years. Assuming that the cost of capital is 8%, which proposal may be recommended on the basis of Net Present Value criteria. Select one: a. Project B, NPV 1731290 b. Project A, NPV 20198 c. Project B, NPV 2019839 d. Project A, NPV 2019839
18 Fair value less cost to sell: P650,000 Value in use:P750,000 Carrying amount:P1,010,000 Compute the impairment loss Group of answer choices P160,000 P100,000 P260,000 P360,000
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.