Working Papers, Chapters 1-17 for Warren/Reeve/Duchac's Accounting, 26th and Financial Accounting, 14th
26th Edition
ISBN: 9781305392373
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 26, Problem 26.7EX
(a)
To determine
Net present value method is the method which is used to compare the initial
To calculate: The net present value of the investment of Company D.
(b)
To determine
To explain: whether the management would look with favor on the proposal.
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4. The following data are accumulated by Geddes Company in evaluating the purchase of $150,000
of equipment, having a four-year useful life:
Year 1
Year 2
Year 3
Year 4
Year
Net Income
$43,500
26,500
13,500
2,900
Net Cash Flow
$81,000
64,000
50,500
40,000
a. Assuming that the desired rate of return is 15%, determine the net present value for the
proposal. Use the table of the present value of $1 appearing in Exhibit 2 of this chapter.
b. Would management be likely to look with favor on the proposal? Explain.
The following data are accumulated by Lingle Company in evaluating the purchase of $180,000 of equipment having a 4-year useful life:
Net Income
Net Cash Flow
Year 1
$51,000
$96,000
Year 2
33,000
78,000
Year 3
15,000
60,000
Year 4
3,000
48,000
Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use the table of the present value of $1 appearing in Exhibit 2 of this chapter.
Consider a piece of equipment for which the expenditure at the beginning of period 1 is $20,000
The net revenue at the end of year 1 is $8,000
The net revenue at the end of year 2 is $14,000
The net revenue at the end of year 3 is $18,000, which includes salvaging the equipment.
The interest rate is 5%.
What is the net present value of this investment over the three year period including the initial purchase of the asset and the revenue from the first three years of operation
(including sale of the equipment)?
Chapter 26 Solutions
Working Papers, Chapters 1-17 for Warren/Reeve/Duchac's Accounting, 26th and Financial Accounting, 14th
Ch. 26 - What are the principal objections to the use of...Ch. 26 - Discuss the principal limitations of the cash...Ch. 26 - Prob. 3DQCh. 26 - Your boss has suggested that a one-year payback...Ch. 26 - Prob. 5DQCh. 26 - Prob. 6DQCh. 26 - A net present value analysis used to evaluate a...Ch. 26 - Two projects haw an identical net present value of...Ch. 26 - Prob. 9DQCh. 26 - What are the major disadvantages of the use of the...
Ch. 26 - Prob. 11DQCh. 26 - Give an example of a qualitative factor that...Ch. 26 - Prob. 26.1APECh. 26 - Average rate of return Determine the average rate...Ch. 26 - Prob. 26.2APECh. 26 - Cash payback period A project has estimated annual...Ch. 26 - Prob. 26.3APECh. 26 - Net present value A project has estimated annual...Ch. 26 - Internal rate of return A project is estimated to...Ch. 26 - Internal rate of return A project is estimated to...Ch. 26 - Prob. 26.5APECh. 26 - Prob. 26.5BPECh. 26 - Average rate of return The following data are...Ch. 26 - Average rate of returncost savings Midwest...Ch. 26 - Average rate of return-new product Galactic Inc....Ch. 26 - Prob. 26.4EXCh. 26 - Prob. 26.5EXCh. 26 - Cash payback method Lily Products Company is...Ch. 26 - Prob. 26.7EXCh. 26 - Prob. 26.8EXCh. 26 - Prob. 26.9EXCh. 26 - Prob. 26.10EXCh. 26 - Prob. 26.11EXCh. 26 - Prob. 26.12EXCh. 26 - Net present value method and present value index...Ch. 26 - Prob. 26.14EXCh. 26 - Cash payback period, net present value analysis,...Ch. 26 - Internal rate of return method The internal rate...Ch. 26 - Prob. 26.17EXCh. 26 - Internal rate of return methodtwo projects Munch N...Ch. 26 - Prob. 26.19EXCh. 26 - Prob. 26.20EXCh. 26 - Prob. 26.21EXCh. 26 - Prob. 26.22EXCh. 26 - Average rate of return method, net present value...Ch. 26 - Cash payback period, net present value method, and...Ch. 26 - Net present value method, present value index, and...Ch. 26 - Prob. 26.4APRCh. 26 - Alternative capital investments The investment...Ch. 26 - Capital rationing decision for a service company...Ch. 26 - Average rate of return method, net present value...Ch. 26 - Prob. 26.2BPRCh. 26 - Prob. 26.3BPRCh. 26 - Net present value method, internal rate of return...Ch. 26 - Prob. 26.5BPRCh. 26 - Capital rationing decision for a service company...Ch. 26 - Ethics in Action Danielle Hastings was recently...Ch. 26 - Prob. 26.2CPCh. 26 - Global Electronics Inc. invested 1,000,000 to...Ch. 26 - Qualitative issues in investment analysis The...Ch. 26 - Prob. 26.5CP
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