Purchase price Expected useful life Scrap value Depreciation per year Minimum required rate of return Expected net profit: End of Voor 1 Machine A R800 000 4 years 0 R200 000 12% R20 000 Machine B R800 000 4 years 0 R200 000 12% R80 000

Purchase price Expected useful life Scrap value Depreciation per year Minimum required rate of return Expected net profit: End of Voor 1 Machine A R800 000 4 years 0 R200 000 12% R20 000 Machine B R800 000 4 years 0 R200 000 12% R80 000

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 7E

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Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $158,800 of equipment, having a four-year useful life: Net Income Net Cash FlowYear 1 $44,000 $75,000 Year 2 27,000 58,000 Year 3 13,000 44,000 Year 4 (1,000) 29,000 Present Value of $1 at Compound InterestYear 6% 10% 12% 15% 20%1 0.943 0.909 0.893 0.870 0.8332 0.890 0.826 0.797 0.756 0.6943 0.840 0.751 0.712 0.658 0.5794 0.792 0.683 0.636 0.572 0.4825 0.747 0.621 0.567 0.497 0.4026 0.705 0.564 0.507 0.432 0.3357 0.665 0.513 0.452 0.376 0.2798 0.627 0.467 0.404 0.327 0.2339 0.592 0.424 0.361 0.284 0.19410 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. Present value of net cash flow $fill in the blank 1Amount to be invested $fill in the blank 2Net present value $fill in the blank 3b. Would…
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $82,600 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $31,000 $53,000 Year 2 19,000 41,000 Year 3 9,000 31,000 Year 4 (1,000) 21,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.…
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $131,700 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $44,000 $74,000 Year 2 27,000 57,000 Year 3 13,000 43,000 Year 4 (1,000) 29,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 12%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.…
Net present value method: The following data are accumulated by g e d dg e s company in evaluating the purchase of $117,800 of equipment, having a four-year useful life: Net income net cash flow Year 1 $ 36,000. $ 61,000 Year 2 22,000 47,000 Year 3 11,000 35,000 Year 4. 1,000 24,000 Present value of $1 at compound interest. Year 6% 10% 2% 15% 20% 1. 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712. 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 A. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use…
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $150,000 of equipment having a four-year useful life: Net Income Net Cash Flow Year 1 $ 42,500 $80,000 Year 2 27,500 65,000 Year 3 12,500 50,000 Year 4 2,500 40,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. (If required, round to the nearest dollar.) Use the table of the present value of $1 presented above. Present value of net cash flow $…
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $129,100 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $41,000 $70,000 Year 2 25,000 54,000 Year 3 12,000 41,000 Year 4 (1,000) 27,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.…
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $150,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $42,500 $80,000 Year 2 27,500 65,000 Year 3 12,500 50,000 Year 4 2,500 40,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. If required, round to the nearest dollar. Use the table of the present value of $1 presented above. Present value of net cash flow $fill in…
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $150,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $42,500 $80,000 Year 2 27,500 65,000 Year 3 12,500 50,000 Year 4 2,500 40,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. If required, round to the nearest dollar. Use the table of the present value of $1 presented above. Present value of net cash flow…
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $138,900 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $35,000 $60,000 Year 2 22,000 46,000 Year 3 11,000 35,000 Year 4 (1,000) 23,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 12%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present…
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $94,600 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $31,000 $53,000 Year 2 19,000 41,000 Year 3 9,000 31,000 Year 4 (1,000) 21,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. Present value of net cash flow $fill in the blank 1 Amount to be…
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $99,100 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $35,000 $59,000 Year 2 21,000 45,000 Year 3 10,000 34,000 Year 4 (1,000) 23,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. Present value of net cash flow $fill in the blank 1 Amount to be…
Service Output MethodGiven:FC = 800,000.00 pesosSV = 200,000.00 pesosn = 5 yearsOutput in year 1 = 300 unitsTotal output in 5 yrs = 1000 unitsa. Depreciation per unit = ?b. Book Value at year 1= ?