View PoliciesCurrent Attempt in ProgressLinda is hoping that an investment of $30,000 will provide additional revenue to the store of $18,000 per year for 3 years. Her partnerin crime, Robert, is confident that a larger investment of $40,200 will be required to bring in a steady flow of $22,800 in new revenueper year for 3 years.Determine the discounted payback period for each investment (using before-tax cash flows). The company's required rate of return is8%. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places e.g. 15.25.)Click here to view the factor tableDiscounted payback periodLindayearsWhose investment appears to better use the company's resources?Robertyears

Step 1: The calculation of Linda's discounted payback period ABCDE1YearCashflowPFV @ 8%Present…

Answered: View Policies Current Attempt in…

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 5E: Cash payback period for a service company Janes Clothing Inc. is evaluating two capital investment...

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Similar questions

Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)
(Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Dubois Inc. (a) Dubois Inc. has $600,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $80,000 at the end of each year for 12 years, and the other is to receive a single lump-sum payment of $1,900,000 at the end of the 12 years. Which alternative should Dubois select? Assume the interest rate is constantover the entire investment.(b) Dubois Inc. has completed the purchase of new Dell computers. The fair value of the equipment is $824,150. The purchase agreement specifies an immediate down payment of $200,000 and semiannual payments of $76,952 beginning at the end of 6 months for 5 years. What is the interest rate, to the nearest percent, used in discounting this purchase transaction?(c) Dubois Inc. loans money to John Kruk Corporation in the amount of $800,000. Dubois accepts an 8% note due in 7 years with interest payable…
Laura is hoping that an investment of $30,200 will provide additional revenue to the store of $18,100 per year for 3 years. Her partner in crime, Kevin, is confident that a larger investment of $40,000 will be required to bring in a steady flow of $23,200 in new revenue per year for 3 years.Determine the discounted payback period for each investment (using before-tax cash flows). The company’s required rate of return is 9%. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places e.g. 15.25.)Click here to view the factor table Laura Kevin Discounted payback period enter discounted payback period rounded to 2 decimal places years enter discounted payback period rounded to 2 decimal places years Whose investment appears to better use the company’s resources?select an option
Payback Period Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Colby Hepworth has just invested $525,000 in a book and video store. She expects to receive a cash income of $120,000 per year from the investment. Kylie Sorensen has just invested $1,700,000 in a new biomedical technology. She expects to receive the following cash flows over the next 5 years: $350,000, $490,000, $850,000, $510,000, and $340,000. Carsen Nabors invested in a project that has a payback period of 4 years. The project brings in $960,000 per year. Rahn Booth invested $1,300,000 in a project that pays him an even amount per year for 5 years. The payback period is 2.5 years. Required: 1. What is the payback period for Colby? Round your answer to two decimal places. years 2. What is the payback period for Kylie? Round your answer to one decimal place. years 3. How much did Carsen invest in the project?$ 4. How much cash does Rahn receive each year?$per year
Payback Period Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Colby Hepworth has just invested $400,000 in a book and video store. She expects to receive a cash income of $120,000 per year from the investment. Kylie Sorensen has just invested $1,400,000 in a new biomedical technology. She expects to receive the following cash flows over the next 5 years: $350,000, $490,000, $700,000, $420,000, and $280,000. Carsen Nabors invested in a project that has a payback period of 4 years. The project brings in $960,000 per year. Rahn Booth invested $1,300,000 in a project that pays him an even amount per year for 5 years. The payback period is 2.5 years. Required: 1. What is the payback period for Colby? Round your answer to two decimal places.fill in the blank 1 years 2. What is the payback period for Kylie? Round your answer to one decimal place.fill in the blank 2 years 3. How much did Carsen invest in the project?$fill in the blank…
CAPITAL BUDGETING Armanny, chief financial officer of Jeysifap Company, expects the firm’s net profits after taxes for the next 5 years to be as shown in the following table. YEAR NET PROFIT AFTER TAX 1 100,000 2 150,000 3 200,000 4 250,000 5 320,000 Armanny is beginning to develop the relevant cash flows needed to analyze whether to renewor replace Jeysifap’s only depreciable asset, amachine that originally cost $30,000, has acurrent book value of zero, and can now be soldfor $20,000. (Note: Because the firm’s onlydepreciable asset is fully depreciated— its bookvalue is zero—its expected net profits after taxesequal its operating cash inflows.) He estimatesthat at the end of 5 years, the existing machinecan be sold to net $2,000 before taxes. Armanny plans to use the following information todevelop the relevant cash flows for each of the alternatives. Alternative 1 Renew the existing machine at a total depreciable cost of $90,000. Therenewed machine would have a…

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