The project costs 1,40,000 and has no scrap value after five years. It is depreciated on straight line method. The outstanding investment in the project is as follows, At the end of first year 30,000 At the end of second year 50,000 70,000 At the end of third year At the end of fourth year At the end of fifth year 90,000 1,10,000 3,50,000

The project costs 1,40,000 and has no scrap value after five years. It is depreciated on straight line method. The outstanding investment in the project is as follows, At the end of first year 30,000 At the end of second year 50,000 70,000 At the end of third year At the end of fourth year At the end of fifth year 90,000 1,10,000 3,50,000

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter10: Long-lived Tangible And Intangible Assets

Section: Chapter Questions

Problem 8Q

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Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
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