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
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Chapter A, Problem A.22BE
To determine
Annuity: The fixed amount paid or received in equal time periods is referred to as annuity.
Present value: This is the amount of future value reduced or discounted at a rate of interest till particular current date.
Formula to compute present value of annuity:
To determine: The present value of annual cash flows of $2,700, to be received from the retreading machine for 7 years, if cash flows earn 9%, and indicate the purchase decision
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Manny Kurr is considering the purchase of a beauty salon. The initial costof this purchase is $16,000. The after-tax cash flows from this investmentshould be $4,000 per year for the next 5 years. His opportunity cost of capitalis 10 percent. Calculate the following:a. Payback—Should Manny buy the beauty salon based on payback if hisrequired payback is less than 3 years?b. The present value of the benefits (PVB),c. The present value of the costs (PVC),d. The net present value (NPV )—Should Manny buy the beauty salon basedon NPV rules?e. Profitability index (PI )—what does the profitability index mean in terms ofbuying the beauty salon?f. Internal rate of return (IRR), (Hint: Use interpolation)—should Manny buythe beauty salon based on IRR rules?g. Accounting rate of return (ARR)—Should Manny buy the beauty salonbased on the ARR?
John is considering the purchase of a lot. He can buy the lot today and expects the price to rise to $15,000 at the end of 10 years. He believes that he should earn an investment yield of 8 percent compounded annually on his investment. The asking price for the lot is $7,000. Should he buy it? What is the internal rate of return compounded annually on the investment if Johnpurchases the property for $7,000 and is able to sell it 10 years later for $15,000?
Blossom Googal owns a garage and is contemplating purchasing a tire retreading machine for $32.820. After estimating costs and
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return of 8% on such investments.
Click here to view the factor table.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
What is the present value of the retreading operation? (Round answer to 2 decimal places, eg. 25.25)
Present value
2$
Should Blossom Googal purchase the retreading machine?
Chapter A Solutions
Managerial Accounting: Tools For Business Decision Making, Seventh Edition Wileyplus Card
Ch. A - Prob. A.1BECh. A - Kor each of the following cases, indicate (a) what...Ch. A - Liam Company signed a lease for an office building...Ch. A - Prob. A.4BECh. A - Prob. A.5BECh. A - Prob. A.6BECh. A - For each of the following cases, indicate (a) what...Ch. A - Prob. A.8BECh. A - Prob. A.9BECh. A - Prob. A.10BE
Ch. A - Prob. A.11BECh. A - Prob. A.12BECh. A - Dempsey Railroad Co. is about to issue 400,000 of...Ch. A - Prob. A.14BECh. A - Neymar Taco Company receives a 75,000, 6-year note...Ch. A - Prob. A.16BECh. A - Frazier Company issues a 10%, 5-year mortgage note...Ch. A - Prob. A.18BECh. A - Prob. A.19BECh. A - Prob. A.20BECh. A - Prob. A.21BECh. A - Prob. A.22BECh. A - Prob. A.23BECh. A - Prob. A.24BECh. A - Prob. A.25BECh. A - As the purchaser of a new house, Carrie Underwood...Ch. A - Using a financial calculator, solve for the...Ch. A - Using a financial calculator, provide a solution...
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