The production department is proposing the purchase of an automatic insertion machine. T have identified 3 machines and have asked the accountant to analyze them to determine th best cash payback. Machine A P40,000 Machine B Machine C P75,000 Annual Cash Flow P50,000 Average Investment P300.000 P250.000 P500.000

The production department is proposing the purchase of an automatic insertion machine. T have identified 3 machines and have asked the accountant to analyze them to determine th best cash payback. Machine A P40,000 Machine B Machine C P75,000 Annual Cash Flow P50,000 Average Investment P300.000 P250.000 P500.000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PB: A bookstore is planning to purchase an automated inventory/remote marketing system, which includes...

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The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best cash payback. Machine A Machine B Machine C Annual cash flow $40,000 $50,000 $75,000 Average investment 300,000 250,000 500,000 a.Machine A b.Machine C c.Machine B d.Machines B and C have the same preferred payback period.
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The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $838,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year     Office Expansion Server 1 $234,000 $309,000 2 234,000 309,000 3 234,000 309,000 4 234,000 309,000 5 234,000 6 234,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $293,000. 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…
The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $838,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year     Office Expansion     Server 1 $234,000 $309,000 2 234,000 309,000 3 234,000 309,000 4 234,000 309,000 5 234,000 6 234,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $293,000. 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…
You are given the following information. What is the initial cash outflow? Purchase and installation of new equipment $12,000 Sale price of replaced equipment $  6,000 Book value of replaced equipment $  3,000 When the new equipment is installed:    Inventory increase $  2,000    Accounts payable increase $  1,000    Tax rate 40% Group of answer choices $7,400 $11,000 $7,000 $8,600