MANAGERIAL ACCT (LL) W/ ACCESS CODE >C
4th Edition
ISBN: 9781323478684
Author: Braun
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 12.58AP
1.
To determine
The payback period, the ARR, and the NPVof the project.
2.
To determine
To conclude: That the which project between A and B should be chosen.
3.
To determine
The IRR of project A and B.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Lynch Pin in Learning is considering investing $411,000 in equipment to expand their operation. They anticipate this investment will save them $68,500 per year for each of the 8 years of its useful life.What will be the payback for this investment?
Amount Invested
/
Expected annual net cash inflow
=
Payback (Years)
/
=
You are contemplating to invest in your classmate’s business, use IRR to evaluate the project whether to accept or reject. Use the following info: Cost of Capital: 10%; Initial Investment: ₱20,000; Cash Flows over the past 5 years: Years 1 & 2: ₱5,000; Years 3 & 4: ₱1,000; Year 5: ₱1,250. Use Excel Method in finding the IRR
In the provided scenario, you address the time value of money also known as discounted cash flow analysis. This type of analysis is crucial to being able to viably analyze financial statements. The start - up firm you founded is trying to save $10, 000 in order to buy a parcel of land for a proposed small warehouse expansion. In order to do so, your finance manager is authorized to make deposits of S 1250 per year into the company account that is paying 12% annual interest. The last deposit will be less than $1250 if less is needed to reach $10,000. How many years will it take to reach the $10,000 goal and how large will the last deposit be? Show your work
Chapter 12 Solutions
MANAGERIAL ACCT (LL) W/ ACCESS CODE >C
Ch. 12 - Prob. 1QCCh. 12 - (Learning Objective 2) After identifying potential...Ch. 12 - Prob. 3QCCh. 12 - Prob. 4QCCh. 12 - Prob. 5QCCh. 12 - Prob. 6QCCh. 12 - Prob. 7QCCh. 12 - Prob. 8QCCh. 12 - Prob. 9QCCh. 12 - (Learning Objective 5) Which of the following...
Ch. 12 - Order the capital budgeting process (Learning...Ch. 12 - Prob. 12.2SECh. 12 - Prob. 12.3SECh. 12 - Prob. 12.4SECh. 12 - Prob. 12.5SECh. 12 - Prob. 12.6SECh. 12 - Prob. 12.7SECh. 12 - Prob. 12.8SECh. 12 - Prob. 12.9SECh. 12 - Prob. 12.10SECh. 12 - Prob. 12.11SECh. 12 - Prob. 12.12SECh. 12 - Prob. 12.13SECh. 12 - Prob. 12.14SECh. 12 - Prob. 12.15SECh. 12 - Identify ethical standards violated (Learning...Ch. 12 - Prob. 12.17AECh. 12 - Compute payback period and analyze changes...Ch. 12 - Prob. 12.19AECh. 12 - Prob. 12.20AECh. 12 - Prob. 12.21AECh. 12 - Prob. 12.22AECh. 12 - Calculate the payback and NPV for a sustainable...Ch. 12 - Prob. 12.24AECh. 12 - Prob. 12.25AECh. 12 - Prob. 12.26AECh. 12 - Prob. 12.27AECh. 12 - Prob. 12.28AECh. 12 - Prob. 12.29AECh. 12 - Prob. 12.30AECh. 12 - Prob. 12.31AECh. 12 - Prob. 12.32AECh. 12 - Prob. 12.33AECh. 12 - Prob. 12.34AECh. 12 - Prob. 12.35AECh. 12 - Prob. 12.36BECh. 12 - Prob. 12.37BECh. 12 - Prob. 12.38BECh. 12 - Prob. 12.39BECh. 12 - Prob. 12.40BECh. 12 - Prob. 12.41BECh. 12 - Prob. 12.42BECh. 12 - Prob. 12.43BECh. 12 - Prob. 12.44BECh. 12 - Prob. 12.45BECh. 12 - Prob. 12.46BECh. 12 - Prob. 12.47BECh. 12 - Prob. 12.48BECh. 12 - Prob. 12.49BECh. 12 - Prob. 12.50BECh. 12 - Prob. 12.51BECh. 12 - Prob. 12.52BECh. 12 - Prob. 12.53BECh. 12 - Prob. 12.54BECh. 12 - Prob. 12.55APCh. 12 - Prob. 12.56APCh. 12 - Prob. 12.57APCh. 12 - Prob. 12.58APCh. 12 - Prob. 12.59BPCh. 12 - Prob. 12.60BPCh. 12 - Evaluate an investment using all four methods...Ch. 12 - Prob. 12.62BPCh. 12 - Prob. 12.63SCCh. 12 - Discussion Questions 1. Describe the capital...Ch. 12 - Prob. 12.65ACTCh. 12 - Prob. 12.66ACTCh. 12 - Prob. 12.67ACT
Knowledge Booster
Similar questions
- Shoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Old Backhoes New Backhoes Purchase cost when new…arrow_forwardShoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Old Backhoes New Backhoes Purchase cost when new…arrow_forwardShoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Old Backhoes New Backhoes Purchase cost when new…arrow_forward
- Monson Company is considering three investment opportunities with cash flows as described below: Project A: Cash investment now $15,000 Cash inflow at the end of 5 years $21,000 Cash inflow at the end of 8 years $30,000 Project B: Cash investment now $11,000 Annual cash outflow for 5 years $3,000 Additional cash inflow at the end of 5 years $25,000 Project C: Cash investment now $21,000 Annual cash inflow for 4 years $8,000 Cash outflow at the end of 3 years $10,000 Additional cash inflow at the end of 4 years $10,000 Required: Compute the net present value of each project assuming Monson Company uses a 12% discount rate.arrow_forwardMonson Company is considering three investment opportunities with cash flows as described below: Project A: Cash investment now $15,000 Cash inflow at the end of 5 years $21,000 Cash inflow at the end of 8 years $30,000 Project B: Cash investment now $11,000 Annual cash outflow for 5 years $3,000 Additional cash inflow at the end of 5 years $25,000 Project C: Cash investment now $21,000 Annual cash inflow for 4 years $8,000 Cash outflow at the end of 3 years $10,000 Additional cash inflow at the end of 4 years $10,000 needed Compute the net present value of each project assuming Monson Company uses a 12% discount rate.arrow_forwardA master of accountancy degree at Central University costs $12,000 for an additional fifth year of education beyond the bachelor’s degree. Assume that all tuition is paid at the beginning of the year. A student considering this investment must evaluate the present value of cash flows from possessing a graduate degree versus holding only an undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn a salary of $50,00 per year (assumed to be paid at the end of the year for 10 years. Assume that the average student with a master of accountancy degree is expected to earn a salary of $66,000 per year (assumed to be paid at the end of the year) for nine years after graduation. Assume a minimum rate of return of 10%. Round to the nearest dollar. Determine the net present value of cash flows from an undergraduate degree. Use the present value of an annuity table appearing in Exhibit 5 of this chapter. Determine the net present value of cash flows…arrow_forward
- The owner of Adolla Bar and Restaurant is considering expanding the business. He is choosing between two alternatives: (1) build a new restaurant, or (2) buy and renovate an old building. The projected cash flows from these two alternatives are as follows: Build Buy and renovate Initial cash outflow (Year 0) 332,000 215,000 Cash inflows (Years 1 to 10) 46,000 39,500 Cash inflows (Years 11 to 20) 46,000 - The required rate of return is 9%. Ignore tax impacts. Required: Calculate the following for the projects: Payback period Accounting rate of return using (i) initial investment and (ii) average investment as the denominator Net present value Internal rate of returnarrow_forwardMGMT2023 - Financial Management 1-UWI Open Campus Stephanie Carter has been gifted a sum of $50,000 by her grandparents on completing her graduation successfully. She is a fresh finance graduate and is excited to invest some money in the capital market, for which she intends to use the gifted sum of $50,000. However, instead of committing this money to the market immediately, she decides to wait for some time, work in the field and acquire some experience before proceeding with her intended investment. She thus contemplates an extremely conservative investment in a portfolio of stocks and bonds, at the start of year 5 from now. For now, she will leave the $50,000 in a fixed deposit with the bank which promises an interest rate of 6% per annum. She will require a return of at least 9% on her stock investments and 4% on bond investments. Stephanie would have to pay 25% taxes on any interest income. Dividends will be tax-free. Stephanie's research has allowed her to narrow down on the…arrow_forwardHi there, I am working on this problem, how do i solve it without using excel? CCM ltd. has a budget of $32 million dollars to spend on these investments (the table attached). Choose the best combination of investments using the profitability index. The cost of capital is 6%. Cash flow from investments are all per year in perpetuity.arrow_forward
- As a newly employed Chief Finance Officer of EKM School Complex, you are offered the following two mutually exclusive projects. Cash Flows(GHS) Year Project A Project B 0 -5,000 -100,000 1 4,500. 65,000 2. 4,500 65,000 a) What are the IRRs of these two projects? (Use the formula provided in the appendix) b) If you are told only the IRRs of the projects, which would you choose? c) What did you ignore when you made your decision in part (b)? d) According to the NPV rule, which one of these two projects should be pursued? Assume appropriate discount rate of 15%. Appendix For all IRR calculations please use the formula below IRR = a+(b-a)[NPV@a/NPV@a - NPV@b]arrow_forwardUse Excel to solve the following problem. Assume that as a local government financial analyst you are asked to project the feasibility of a loan to a proposed public service venture for its start-up funding. The venture’s principals estimate that, at the end of 5 years, they will be able to pay back up to $800,000 from revenues accruing to the venture’s activities. Assuming that your organization’s current “average cost of capital” is 4.8% (the “discount rate”). Assuming monthly compounding, what is the maximum amount your government can commit to the venture for its start-up? (I have worked this problem out on my own, I just want to be sure I used the correct formulas.)arrow_forwardThe firm plans to use a 12% cost of capital to evaluate each computer. Computer A: Initial outlay=50,000, cash inflow=7,000 for 6 years Computer B: Initial outlay=35,000 cash inflow=5,500 for year 1, 12,000 for year 2, 16,000 for year 3, 23,000 for year 4 Computer C: Initial outlay=60,000, cash inflow=18,000 for 5 years a) calculate the NPV for each computer over its life. b) find the equivalent annual cost for each computer over its life.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub