GEN COMBO LL MANAGERIAL ACCOUNTING; CONNECT ACCESS CARD
16th Edition
ISBN: 9781260088458
Author: Ray H Garrison
Publisher: McGraw-Hill Education
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Chapter 13.C, Problem 3P
PROBLEM 13C-3 Income Taxes and
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project:
Cost of equipment needed………………………………….. $250,000
Repair the equipment in two years………………………….. $18,000
Annual revenues and costs:
Sales revenues………………………………………………… $350,000
Variable expenses…………………………………………….. $180,000
Fixed out-of-pocket operating costs………………………….. $80,000
The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straight-line
Required:
- Calculate the annual income tax expense for each of years 1 through 5 that will arise as a result of this investment opportunity.
- Calculate the net present value of this investment opportunity.
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Exercise 14-1 (Algo) Payback Method [LO14-1]
The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:
Year
Investment
Cash Inflow
1
$ 61,000
$ 3,000
2
$ 5,000
$ 6,000
3
$ 12,000
4
$ 13,000
5
$ 16,000
6
$ 10,000
7
$ 8,000
8
$ 10,000
9
$ 9,000
10
$ 9,000
Required:
1. Determine the payback period of the investment.
2. Would the payback period be affected if the cash inflow in the last year were several times as large?
QUESTION 32
Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%:
FV of $1
FVOA
PV of $1
PVOA
2.59374
15.93742
0.38554
6.14457
Required: What is the present value of the cash outflows/Investment
$1,750,000
$963,850
$(963,850)
$(1,750,000)
QUESTION 37
Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%:
FV of $1
FVOA
PV of $1
PVOA
2.59374
15.93742
0.38554
6.14457
Required: Evaluate the investment
Both Payback and Accounting Rate of Return measures support the decision to purchase of a computer-aided manufacturing system, but do not consider the time value of money. The net present value is negative which is favorable. There are other relevant variables that need to be considered such as any changes in operating costs and any non-financial or qualitative factors.
Both Payback and Accounting Rate of Return measures support…
Chapter 13 Solutions
GEN COMBO LL MANAGERIAL ACCOUNTING; CONNECT ACCESS CARD
Ch. 13.A - Prob. 1ECh. 13.A - Prob. 2ECh. 13.A - Prob. 3ECh. 13.A - Prob. 4ECh. 13.A - Exercises 13A-5 Basic Present Value Concepts...Ch. 13.A - Prob. 6ECh. 13.C - Prob. 1ECh. 13.C - Prob. 2ECh. 13.C - PROBLEM 13C-3 Income Taxes and Net Present Value...Ch. 13.C - Prob. 4P
Ch. 13.C - PROBLEM 13C-5 Income Taxes and Net Present Value...Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10QCh. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - What is the major criticism of the payback and...Ch. 13 -
The Excel worksheet form that appears below is to...Ch. 13 - Prob. 1F15Ch. 13 - Prob. 2F15Ch. 13 - Prob. 3F15Ch. 13 - Prob. 4F15Ch. 13 - Prob. 5F15Ch. 13 - Prob. 6F15Ch. 13 - Prob. 7F15Ch. 13 - Prob. 8F15Ch. 13 - Prob. 9F15Ch. 13 - Prob. 10F15Ch. 13 - (
595.000
)...Ch. 13 - Prob. 12F15Ch. 13 - Prob. 13F15Ch. 13 - Prob. 14F15Ch. 13 - Prob. 15F15Ch. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 -
EXERCISE 13-15 Internal Rateof Return and Net...Ch. 13 - Prob. 16PCh. 13 - PROBLEM 13-17 Net Present Value Analysis; Internal...Ch. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Prob. 23PCh. 13 - Prob. 24PCh. 13 - Prob. 25PCh. 13 - Prob. 26PCh. 13 -
PROBLEM 13-27 Net Present Value Analysis...Ch. 13 - Prob. 28PCh. 13 - Prob. 29PCh. 13 - Prob. 30PCh. 13 - Prob. 31CCh. 13 - Prob. 32C
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