The management of Arkansas Corporation isconsidering the purchase of a new machinecosting $490,000. The company's desired rateof return is 10%. The present value factors for$1 at compound interest of 10% for 1 through5 years are 0.909, 0.826, 0.751, 0.683, and0.621, respectively. In addition to the foregoinginformation, use the following data indetermining the acceptability of thisinvestment:Year Operating Income12345$100,00040,00040,00010,00010,000Net Cash Flow$180,000120,000100,00090,000120,000The net present value for this investment is

Here,ParticularsYearDiscount factor at 10%Net CashFlowCash…

Answered: The management of Arkansas Corporation…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year 1 2 3 4 5 Income from Operations $100,000 40,000 40,000 10,000 10,000 The cash payback period for this investment is a. 4 years b. 5 years c. 3 years O d. 2 years Net Cash Flow $180,000 120,000 100,000 90,000 120,000
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year OperatingIncome Net CashFlow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000 The cash payback period for this investment is
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year 1 2 3 4 5 Operating Income $100,000 40,000 40,000 10,000 10,000 Net Cash Flow $180,000 120,000 100,000 90,000 120,000 The cash payback period for this investment is O a. 3 years O b. 5 years O c. 2 years O d. 4 years
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Operating Net Cash Year Income Flow 1 $100,000 $180,000 2 40,000 120,000 40,000 100,000 4 10,000 90,000 10,000 120,000 The average rate of return for this investment is Oa. 10% Оb. 18% Ос. 16% С. Od. 58%
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Operating Net Cash Year Income Flow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 10,000 120,000 The average rate of return for this investment is Oa. 10% Оb. 18% Ос. 16% Od. 58%
The management of Retz Corporation is considering the purchase of a new machine costing $500,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for one through five years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: Year Income from Operations Net Cash Flow 1 $100,000 $200,000 2 80,000 170,000 3 50,000 130,000 4 10,000 80,000 5 10,000 80,000 The average rate of return for this investment is _____.
The management of Zesty Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for Years 1 through 5 are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: Year OperatingIncome Net CashFlow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The cash payback period for this investment is
The management of Arkansas Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income fromOperations Net CashFlow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000
The management of Arnold Corporation is considering the purchase of a new machine costing $430,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for one through five years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to this information, use the following data in determining the acceptability in this situation: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The net present value for this investment is a.negative $25,200. b.positive $25,200. c.negative $124,800. d.positive $152,000.
The management of Cooper Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to this information, use the following data in determining the acceptability of the proposed purchase: Year Operating Income Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 What is the present value index for this investment? a.0.36 b.1.45 c.1.08 d.0.92
The management of Cooper Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for one through five years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to this information, use the following data in determining the acceptability in this situation: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The present value index for this investment is a.0.36. b.1.08. c.0.92. d.1.45.
A firm is considering an investment in new equipment that has the following information. Purchase Cost: $123,829 and the equipment will have no salvage value at the end of its five year life. Annual accounting profit is $30,899 Calculate the Accounting Rate of Return, ie the ARR. Express your answer as a percentage with two decimal places

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