Managerial Accounting: Tools For Business Decision Making, Seventh Edition Wileyplus Card
7th Edition
ISBN: 9781118680698
Author: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel
Publisher: John Wiley & Sons Inc
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 12.7E
Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of
Instructions
(a) Determine the
(b) If Iggy Company's required rate of return is 10%. which projects are acceptable?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
Annual
Life of
Project
Investment
Income
Project
22A
$243,600
$17,130
6 years
2ЗА
271,500
20,700
9 years
24A
280,600
15,700
7 years
Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy
Company uses the straight-line method of depreciation.
Click here to view PV table.
(a)
Determine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 13%. For calculation purposes, use 5
decimal places as displayed in the factor table provided.)
Internal Rate of
Project
Return
22A
%
23А
%
24A
%
(b)
If Iggy Company's required rate of return is 11%, which projects are acceptable?
Sheridan Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
Annual
Project Investment
Income
Life of
Project
22A
$240,900
$17,400
6 years
23A
274,900
20,950
9 years
24A
283,900
15,700
7 years
Annual net income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project.
Sheridan Company uses the straight-line method of depreciation.
Click here to view PV table.
(a)
Determine the internal rate of return for each project. (Round answers O decimal places, eg. 13%. For calculation purposes, use 5 decimal
places as displayed in the factor table provided.)
Project
Internal Rate of
Return
Bridgeport Company is considering two capital expenditures. Relevant data for the projects are as follows:
Project
Initial investment
Annual cash inflow
Life of project
Salvage value
A
$260,084
$46,590
Project A
7 years
$0
Project B
Click here to view the factor table.
Bridgeport Company uses the straight-line method to depreciate its assets.
B
$278,237
Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the factor table
provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.)
$44,540
9 years
$0
Internal rate of return
%
%
Chapter 12 Solutions
Managerial Accounting: Tools For Business Decision Making, Seventh Edition Wileyplus Card
Ch. 12 - Prob. 1QCh. 12 - Prob. 2QCh. 12 - Tom Wells claims the formula for the cash payback...Ch. 12 - Prob. 4QCh. 12 - What is the decision rule under the net present...Ch. 12 - Discuss the factors that determine the appropriate...Ch. 12 - What simplifying assumptions were made in the...Ch. 12 - What are some examples of potential intangible...Ch. 12 - What steps can be taken to incorporate intangible...Ch. 12 - Prob. 10Q
Ch. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - What are the strengths of the annual rate of...Ch. 12 - Prob. 15QCh. 12 - Prob. 16QCh. 12 - Prob. 12.1BECh. 12 - Hsung Company accumulates the following data...Ch. 12 - Thunder Corporation, an amusement park, is...Ch. 12 - Caine Bottling Corporation is considering the...Ch. 12 - McKnight Company is considering two different,...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.1DICh. 12 - Prob. 12.2DICh. 12 - Prob. 12.3DICh. 12 - Prob. 12.4DICh. 12 - Prob. 12.5DICh. 12 - Prob. 12.1ECh. 12 - Doug's Custom Construction Company is considering...Ch. 12 - Prob. 12.3ECh. 12 - BAK Corp. is considering purchasing one of two new...Ch. 12 - Bruno Corporation is involved in the business of...Ch. 12 - BSU Inc. wants to purchase a new machine for...Ch. 12 - Iggy Company is considering three capital...Ch. 12 - Prob. 12.8ECh. 12 - Legend Service Center just purchased an automobile...Ch. 12 - Vilas Company is considering a capital investment...Ch. 12 - Drake Corporation is reviewing an investment...Ch. 12 - U3 Company is considering three long-term capital...Ch. 12 - Prob. 12.2APCh. 12 - Brooks Clinic is considering investing in new...Ch. 12 - Jane's Auto Care is considering the purchase of a...Ch. 12 - Prob. 12.5APCh. 12 - Prob. 12CDCh. 12 - Luang Company is considering the purchase of a new...Ch. 12 - Prob. 12.2BYPCh. 12 - Tecumseh Products Company has its headquarters in...Ch. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.5BYPCh. 12 - Prob. 12.6BYPCh. 12 - Prob. 12.8BYP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Oriole Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Annual Project Investment Income 22A $242,100 $17,560 271,300 283,800 23A 24A (a) Annual net income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Oriole Company uses the straight-line method of depreciation. Click here to view the factor table. Project 20,630 22A 15,700 Determine the internal rate of return for each project. (Round answers to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 23A 24A Internal Rate of Return % The following project(s) are acceptable Life of Project 6 years 9 years 7 years % % (b) If Oriole Company's required rate of return is 11%, which projects are acceptable?arrow_forwardDetermine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Project 22A 23A 24A (b) Internal Rate of Return % % % If Sunland Company's required rate of return is 11%, which projects are acceptable? The following project(s) are acceptablearrow_forwardThe following are the relevant data of two alternative machines are shown in the table below. Determine which is the better machine if T=40%, a CFAT MARR of 10%, and SL as a depreciation method. What is the depreciation per year? Note: Calculate the CFAT thru tabular method. Use AW for solving.arrow_forward
- Windsor Company is considering two capital expenditures. Relevant data for the projects are as follows: Project Initial investment Annual cash inflow Life of project Salvage value A $202,003 $41,080 6 years $0 B $306,910 $49,130 9 years $0 Windsor Company uses the straight-line method to depreciate its assets. Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the facto provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.)arrow_forwardMariam is analyzing a project and has gathered the following data. The firm depreciates its assets using straight-line depreciation to a zero book value over the life of the asset. Required rate of return on this project is 10% Year Cash Flow Net Income 0 -$642,000 n/a 1 170,000 $9,500 2 240,000 79,500 3 $270,000 $85,500 a.What is the payback period for this project? b. What is the discounted payback period? c. What is the projects average accounting rate of return (AAR)? d. What is the NPV for this project? e. What is the profitability index for this project? f. Based on your answers in a) through e), which project will you finally choose?arrow_forwardMariam is analyzing a project and has gathered the following data. The firm depreciates its assets using straight-line depreciation to a zero book value over the life of the asset. Required rate of return on this project is 10% Year Cash Flow Net Income 0 -$642,000 n/a 1 170,000 $9,500 2 240,000 79,500 3 $270,000 $85,500 What is the payback period for this project? What is the discounted payback period? What is the projects average accounting rate of return (AAR)? What is the NPV for this project? What is the profitability index for this project? Based on your answers in a) through e), which project will you finally choose?arrow_forward
- Mariam is analyzing a project and has gathered the following data. The firm depreciates its assets using straight-line depreciation to a zero book value over the life of the asset. Required rate of return on this project is 10% Year Cash Flow Net Income 0 -$642,000 n/a 1 170,000 $9,500 2 240,000 79,500 3 $270,000 $85,500 What is the NPV for this project? What is the profitability index for this project? Based on your answers in a) through e), which project will you finally choose?arrow_forwardA manufacturing company is planning to install an equipment having a first cost of $90Kand a salvage value, after 15 years, of $10,520. The company uses an interest rate of 10%.Find the PW of the depreciation deductions for straight-line, SOYD, double-decliningbalance. Rank the strategies in order of their attractiveness. Identify/determine the bestmethod.arrow_forwardMountain Frost is considering a new project with an initial cost of $205,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $20,000, $20,900, $24,600, and $16,900, respectively. What is the average accounting return? Please make sure its correctarrow_forward
- A company is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant mer the project's life. What is the project's NPV? Project cost of capital (r) 10% Net investment in fixed assets (basis) $65,000 Required new working capital $15,000 Straight-line deprec. rate 33.333% Sales revenues, each year $75,000 Operating costs (excl. deprec.), each year $25,000 Tax rate 35.0% a. $26,297 b. $30,950 c. $23,852 d. $23,045 e. $33,993arrow_forwardMountain Frost is considering a new project with an initial cost of $180,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $19,500, $20,400, $24,600, and $16,400, respectively. What is the average accounting return?arrow_forwardEdelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each.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
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Economic Value Added EVA - ACCA APM Revision Lecture; Author: OpenTuition;https://www.youtube.com/watch?v=_3hpcMFHPIU;License: Standard Youtube License