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Warehouse Year Operating Income 1 $ 61,400 2 51,400 36,400 26,400 (3,600) $172,000 3 4 5 Total Year 1 2 3 4 5 6 7 8 9 10 Required: Each project requires an investment of $368,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 10% 15% 0.943 0.909 0.893 0.870 0.890 0.826 0.797 0.756 0.840 0.792 0.747 Warehouse Net Cash Flow $135,000 125,000 110,000 100,000 70,000 $540,000 Warehouse Tracking Technology 12% Technology Operating Income $ 34,400 34,400 34,400 34,400 34,400 $172,000 0.833 0.694 0.751 0.712 0.658 0.579 0.683 0.636 0.572 0.482 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.513 0.452 0.376 0.279 0.665 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.558 0.386 0.361 0.284 0.194 0.322 0.247 0.162 Net present value 2 The Total present value of net cash flow s Amount to be invested 20% 1a. Compute the average rate of return for each investment. If required, round your answers to one decimal place. Average Rate of Return 29.3 X % % Tracking Technology Net Cash Flow 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar. Warehouse Tracking Technology $108,000 108,000 108,000 108,000 108,000 $540,000 $ net present value exceeds the selected rate established for discounted cash flows (1586) while the ▾ does not Thus considering only quantitative factors the

Warehouse Year Operating Income 1 $ 61,400 2 51,400 36,400 26,400 (3,600) $172,000 3 4 5 Total Year 1 2 3 4 5 6 7 8 9 10 Required: Each project requires an investment of $368,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 10% 15% 0.943 0.909 0.893 0.870 0.890 0.826 0.797 0.756 0.840 0.792 0.747 Warehouse Net Cash Flow $135,000 125,000 110,000 100,000 70,000 $540,000 Warehouse Tracking Technology 12% Technology Operating Income $ 34,400 34,400 34,400 34,400 34,400 $172,000 0.833 0.694 0.751 0.712 0.658 0.579 0.683 0.636 0.572 0.482 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.513 0.452 0.376 0.279 0.665 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.558 0.386 0.361 0.284 0.194 0.322 0.247 0.162 Net present value 2 The Total present value of net cash flow s Amount to be invested 20% 1a. Compute the average rate of return for each investment. If required, round your answers to one decimal place. Average Rate of Return 29.3 X % % Tracking Technology Net Cash Flow 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar. Warehouse Tracking Technology $108,000 108,000 108,000 108,000 108,000 $540,000 $ net present value exceeds the selected rate established for discounted cash flows (1586) while the ▾ does not Thus considering only quantitative factors the

Managerial Accounting
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 5BE
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Year Operating Income 1 $ 61,400 2 51,400 36,400 26,400 (3,600) $172,000 3 4 5 Total Year 1 2 3 4 5 6 Warehouse 7 8 9 10 Required: Each project requires an investment of $368,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 10% 0.943 0.890 0.840 0.751 0.592 0.558 0.909 Warehouse Warehouse Net Cash Flow Tracking Technology $135,000 125,000 110,000 100,000 70,000 $540,000 0.386 0.826 0.797 0.756 0.694 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.665 0.513 0.452 0.376 0.627 0.467 0.404 0.327 0.424 Technology Operating Income 12% $ 34,400 34,400 34,400 34,400 34,400 $172,000 15% 20% 0.893 0.870 0.833 0.335 0.279 0.233 0.361 0.284 0.194 0.322 0.247 Total present value of net cash flow $ Amount to be invested Net present value 2. The 1a. Compute the average rate of return for each investment. If required, round your answers to one decimal place. Average Rate of Return 29.3 X % Tracking Technology Net Cash Flow 0.162 % $108,000 108,000 108,000 108,000 108,000 $540,000 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar. Warehouse Tracking Technology net present value exceeds the selected rate established for discounted cash flows (15%), while the does not. Thus, considering only quantitative factors, the investment should be selected.
Transcribed Image Text:Year Operating Income 1 $ 61,400 2 51,400 36,400 26,400 (3,600) $172,000 3 4 5 Total Year 1 2 3 4 5 6 Warehouse 7 8 9 10 Required: Each project requires an investment of $368,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 10% 0.943 0.890 0.840 0.751 0.592 0.558 0.909 Warehouse Warehouse Net Cash Flow Tracking Technology $135,000 125,000 110,000 100,000 70,000 $540,000 0.386 0.826 0.797 0.756 0.694 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.665 0.513 0.452 0.376 0.627 0.467 0.404 0.327 0.424 Technology Operating Income 12% $ 34,400 34,400 34,400 34,400 34,400 $172,000 15% 20% 0.893 0.870 0.833 0.335 0.279 0.233 0.361 0.284 0.194 0.322 0.247 Total present value of net cash flow $ Amount to be invested Net present value 2. The 1a. Compute the average rate of return for each investment. If required, round your answers to one decimal place. Average Rate of Return 29.3 X % Tracking Technology Net Cash Flow 0.162 % $108,000 108,000 108,000 108,000 108,000 $540,000 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar. Warehouse Tracking Technology net present value exceeds the selected rate established for discounted cash flows (15%), while the does not. Thus, considering only quantitative factors, the investment should be selected.
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