Net Present Value (NPV): NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The acceptance of the project is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected. Payback period: It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the time value of money factor. Internal Rate of Return (IRR): IRR is a capital budgeting technique that involves the time value of money concept. The IRR percentage gives the idea about the profitability arises from an investment. The IRR of a project is calculated with the help of NPV calculations. To compute: The NPV.

Question

Want to see the full answer?

Answer 1

Question

Chapter 21, Problem 21.24E

1 (a)

To determine

Net Present Value (NPV):

NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The acceptance of the project is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected.

Payback period:

It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the time value of money factor.

Internal Rate of Return (IRR):

IRR is a capital budgeting technique that involves the time value of money concept. The IRR percentage gives the idea about the profitability arises from an investment. The IRR of a project is calculated with the help of NPV calculations.

To compute: The NPV.

1 (b)

To determine

To compute: Payback period.

1 (c)

To determine

To compute: The IRR

2.

To determine

To compute: The accrual accounting rate of return based on net initial investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Kendra's Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of 4 years. The estimated pretax cash flows for the oven are as shown in the table that follows, with no anticipated change in working capital. Kendra's Bakery has a 10% after-tax required rate of return and a 30% income tax rate. Assume depreciation is calculated on a straight-line basis for tax purposes using the initial investment in the oven and its estimated terminal disposal value. Assume all cash flows occur at year-end except for initial investment amounts. E (Click the icon to view the estimated cash flows for the oven.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the reguirements. Requirement 1. Calculate (a) net present value, (b) payback period, and (c) internal rate of return. a. Net present value. (Use factors to three decimal places, X.XXX. Round intermediary calculations and your final…

Emma's Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of 4 years. The estimated pretax cash flows for the oven are as shown in the table that follows, with no anticipated change in working capital. Emma's Bakery has a 10% after-tax required rate of return and a 30% income tax rate. Assume depreciation is calculated on a straight-line basis for tax purposes using the initial investment in the oven and its estimated terminal disposal value. Assume all cash flows occur at year-end except for initial investment amounts. E (Click the icon to view the estimated cash flows for the oven.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Data Table i Requirements А В D E 1 Relevant Cash Flows at End of Each Year 1. Calculate (a) net present value, (b) payback period, and (c) internal rate of return. 2. Calculate accrual accounting rate of return based on…

The following is governed by an income tax rate of 25% . Depreciation rate is determined using MACRS A company is considering two alternatives Choice 1 : A machine is purchased for 60,000. It is a 5 year property class. It will be used for 10 years after which it will have a salvage value of 15,000. It is mostly grey with a metallic steel cover. The Before Tax Cash Flow will be 80,000 per year. The machine is purthased from Retained Earning cash outright. It has no extra deductions associated with it. Choice 2: A machine is purchased for 65,000. It is a 10 year property class object. It will be used for 12 years with a salvage value of 18,000. It is mostly blue with a white cover. The Before Tax Cash Flow will be 86,000 per year. The machine is purchased from Retained Earnings Cash Outright. It receives an additional allowance for environmental effects of 5000/yr. The allowance is not taxed. and is not included in the 86,000 BTCF. Only one response below is correct Which of the…

Answer 2

Question

Chapter 21, Problem 21.24E

1 (a)

To determine

Net Present Value (NPV):

NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The acceptance of the project is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected.

Payback period:

It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the time value of money factor.

Internal Rate of Return (IRR):

IRR is a capital budgeting technique that involves the time value of money concept. The IRR percentage gives the idea about the profitability arises from an investment. The IRR of a project is calculated with the help of NPV calculations.

To compute: The NPV.

1 (b)

To determine

To compute: Payback period.

1 (c)

To determine

To compute: The IRR

2.

To determine

To compute: The accrual accounting rate of return based on net initial investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 21, Problem 21.24E

1 (a)

To determine

Net Present Value (NPV):

NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The acceptance of the project is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected.

Payback period:

It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the time value of money factor.

Internal Rate of Return (IRR):

IRR is a capital budgeting technique that involves the time value of money concept. The IRR percentage gives the idea about the profitability arises from an investment. The IRR of a project is calculated with the help of NPV calculations.

To compute: The NPV.

1 (b)

To determine

To compute: Payback period.

1 (c)

To determine

To compute: The IRR

2.

To determine

To compute: The accrual accounting rate of return based on net initial investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 21, Problem 21.24E

1 (a)

To determine

Net Present Value (NPV):

NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The acceptance of the project is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected.

Payback period:

It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the time value of money factor.

Internal Rate of Return (IRR):

IRR is a capital budgeting technique that involves the time value of money concept. The IRR percentage gives the idea about the profitability arises from an investment. The IRR of a project is calculated with the help of NPV calculations.

To compute: The NPV.

1 (b)

To determine

To compute: Payback period.

1 (c)

To determine

To compute: The IRR

2.

To determine

To compute: The accrual accounting rate of return based on net initial investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 21, Problem 21.24E

1 (a)

To determine

Net Present Value (NPV):

NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The acceptance of the project is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected.

Payback period:

It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the time value of money factor.

Internal Rate of Return (IRR):

IRR is a capital budgeting technique that involves the time value of money concept. The IRR percentage gives the idea about the profitability arises from an investment. The IRR of a project is calculated with the help of NPV calculations.

To compute: The NPV.

1 (b)

To determine

To compute: Payback period.

1 (c)

To determine

To compute: The IRR

2.

To determine

To compute: The accrual accounting rate of return based on net initial investment.

Answer 6

Chapter 21, Problem 21.24E

1 (a)

To determine

Net Present Value (NPV):

NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The acceptance of the project is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected.

Payback period:

It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the time value of money factor.

Internal Rate of Return (IRR):

IRR is a capital budgeting technique that involves the time value of money concept. The IRR percentage gives the idea about the profitability arises from an investment. The IRR of a project is calculated with the help of NPV calculations.

To compute: The NPV.

Answer 7

Chapter 21, Problem 21.24E

1 (a)

To determine

Net Present Value (NPV):

NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The acceptance of the project is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected.

Payback period:

It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the time value of money factor.

Internal Rate of Return (IRR):

IRR is a capital budgeting technique that involves the time value of money concept. The IRR percentage gives the idea about the profitability arises from an investment. The IRR of a project is calculated with the help of NPV calculations.

To compute: The NPV.

Answer 8

1 (b)

To determine

To compute: Payback period.

Answer 9

1 (b)

To determine

To compute: Payback period.

Answer 10

1 (c)

To determine

To compute: The IRR

Answer 11

1 (c)

To determine

To compute: The IRR

Answer 12

2.

To determine

To compute: The accrual accounting rate of return based on net initial investment.

Answer 13

2.

To determine

To compute: The accrual accounting rate of return based on net initial investment.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 17

Ch. 21 - Capital budgeting has the same focus as accrual...Ch. 21 - List and briefly describe each of the five stages...Ch. 21 - Prob. 21.3Q Ch. 21 - Only quantitative outcomes are relevant in capital...Ch. 21 - How can sensitivity analysis be incorporated in...Ch. 21 - Prob. 21.6Q Ch. 21 - Describe the accrual accounting rate-of-return...Ch. 21 - Prob. 21.8Q Ch. 21 - Lets be more practical. DCF is not the gospel....Ch. 21 - All overhead costs are relevant in NPV analysis....

Solution Summary: The author explains that NPV is a technique used in capital budgeting to see the project is profitable for the company or not.

To compute: Payback period.

To compute: The IRR

To compute: The accrual accounting rate of return based on net initial investment.

Want to see the full answer?

Chapter 21 Solutions