Year 0 ($400,000) initial investment Year 1 $140,000 Year 2 120,000 Year 3 100,000 Year 4 80,000, A company has a minimum required rate of return of 10%. The company is considering an investment that would yield an after-tax cash flow of $30,000 in four years. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income, Elmdale Company is considering an investment that will return a lump sum of $725,500, 6 years from now. Management estimates the machine will yield an after-tax net income of $12,500 each year. Compute the net present value of this investment. The management of Samsung is planning to invest in a new companywide computerized inventory tracking system. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. a. All other trademarks and copyrights are the property of their respective owners. Management estimates that this machine will generate annual after-tax net income of $540. What amount should Elmdale Company pay for this investment to earn a 8% return? The following information applies to the questions displayed below.J Peng Company is considering an investment expected to generate an average net income after taxes of $2,800 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $3,500 for three years. The investment costs $58, 500 and has an estimated $7, 500 salvage value. The investment costs $48,000 and has an estimated $10,200 salvage value. should purchase a used Caterpillar mini excavator, A) The distribution of exam scores for Statistics is normally All other trademarks and copyrights are the property of their respective owners. Peng Company is considering an investment expected to generate an average net income after taxes of $2,000 for three years. The corporate tax rate is 35 percent. $40,000 Economic life 5 years Salvage value Zero Tax rate payable (assume paid in year of income) 30, A machine costs $500,000, has a $28,700 salvage value, is expected to last eight years, and will generate an after-tax income of $72,000 per year after straight-line depreciation. Compute this machine's accou, A machine costs $300,000 and is expected to yield an after-tax net income of $9,000 each year. Compute the accounting rate of return for this. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. The investment costs $54,000 and has an estimated $7,200 salvage value. $ $ Accounting Rate of Return Choose . The system is expected to generate net cash flows of $13,000 per year for the next 35 years. What amount should Flower Company pay for this investment to earn an 11% return? Management predicts this machine has a 10-year service life and a $105,000 salvage value, and it uses straight-line depreciation. The system requires a cash payment of $125,374.60 today. Compute the net present value of this investment. This investment will produce certain services for a community such as vehicle kilometres, seat . The company uses the straight-line method of depreciation and has a tax rate of 40 percent. Management estimates that this machine will generate annual after-tax net income of $540. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. View some examples on NPV. The investment costs $57,600 and has an estimated $6,000 salvage value. (For calc, Natt Company is considering undertaking a project that would yield annual profits (after depreciation) of $68,000 for 5 years. Melton Company's required rate of return on capital budgeting projects is 16%. Furthermore, the implication of strategic orientation for . It gives us the profitability and desirability to undertake the project at our required rate of return. The amount to be invested is $210,000. Q: Peng Company is considering an investment expected to generate an average net. The investment costs $48,600 and has an estimated $6,300 salvage value. The company anticipates a yearly net income of $3,800 after taxes of 16%, with the cash flows to be received evenly throughout each year. It expects the free cash flow to grow at a constant rate of 5% thereafter. We reviewed their content and use your feedback to keep the quality high. Explain. (PV of $1. Learn about what net present value is, how it is calculated both for a lump sum and for a stream of income over multiple years. c) Only applies to a business organized as corporations. See Answer. 2.72. The investment costs $45,000 and has an estimated $6,000 salvage value. Estimate Longlife's cost of retained earnings. The company anticipates a yearly after-tax net income of $1,805. The present value of an annuity due for five years is 6.109. Peng Company is considering an investment expected to generate an average net income after taxes of $2,600 for three years. Select Chart Amount * PV Factor - Present Value Cash Flow Annual cash flow Residual value. A machine costs $190,000, has a $10,000 salvage value, is expected to last nine years, and will generate an after-tax income of $30,000 per year after straight-line depreciation. Which of, Fraser Company will need a new warehouse in eight years. Required information [The folu.ving information applies to the questions displayed below.) Required information Use the following information for the Quick Study below. $2,000 per year for 10 years is the equivalent of $12,835 today ($2,000 6.4177)
What is the internal rate of return if the company buys this machine? Each investment costs $1,000, and the firm's cost of capital is 10%. 2003-2023 Chegg Inc. All rights reserved. The company requires an 8% return on its investments. Using straight-line, Wildhorse Company owns equipment that costs $1,071,000 and has accumulated depreciation of $452,200. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $48,900 and has an estimated $12,000 salvage value. The investment costs $45,600 and has an estimated $8,700 salvage value. Using the straight line method of depreciation, calculate accumul, Lucky Company Is considering a capital investment in machinery: Initial investment $1,400,000 Residual value $300,000 Expected annual net cash inflows $200,000 Expected useful life 10 years Required r, The following data concerns a proposed equipment purchase: Cost $161,100 Salvage value $4,900 Estimated useful life 4 years Annual net cash flows $47,000 Depreciation method Straight-line The annual average investment amount used to calculate the accounti, You have the following information on a potential investment: Capital investment $85,000 Estimated useful life 4 years Estimated salvage value $0 Estimated annual net cash inflows: Year 1 $18,000 Ye, The Seago Company is planning to purchase $524,500 of equipment with an estimated seven-year life and no estimated salvage value. the accounting rate of return for this investment; assume the company uses straight-line depreciation. Peng Company is considering an investment expected to generate an average net income after taxes of. The Galley purchased some 3-year MACRS property two years ago at The asset is expected to have a fair value of $270,000 at five years, and a fair value of $90,000 at the e, Horak Company accumulates the following data concerning a proposed capital investment: cash cost $219,620, net annual cash flow $34,932, present value factor of cash inflows for 10 years 6.71 (rounded). The founder asked you for $220,000 today and you expect to get $1,070,000 in 9 years. #define An irrigation canal contractor wants to determine whether he The system, A machine costs $700,000 and is expected to yield an after-tax net income of $30,000 each year. copyright 2003-2023 Homework.Study.com. The warehouse will cost $370,000 to build. To find the NPV using a financial calacutor: 1. Experts are tested by Chegg as specialists in their subject area. The investment costs $47,400 and has an estimated $8,400 salvage value. The investment costs $49,800 and has an estimated $11,400 salvage value. Assume Peng requires a 10% return on its investments. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. QS 24-8 Net present value LO P3 Assume Peng requires a 15% return on its investments. What rate of return should you expect for your investment in Fir, If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment, which method would the investor normally use to account for this investment? Assume Peng requires a 5% return on its investments. A new operating system for an existing machine is expected to cost $690,000 and have a useful life of six years. [22] also highlight the importance of power companies improving investment portfolio planning for various energy production resources to ensure expected production value and reduce risk. Assume Peng requires a 10% return on its investments. Determine the net present value, and ind. Compute the net present value of this investment. Park Co. is considering an investment that requires immediate payment of $27,000 and provides expected cash inflows of $9,000 annually for four years. Negative amounts should be indicated by a minus sign.) Assume Peng requires a 15% return on its investments. PVA of $1. What is the present value, Strauss Corporation is making a $91,800 investment in equipment with a 5-year life. the net present value of this investment. Compute the payback period. value. Accounting Rate of Return Choose Numerator: Choose Denominator: Accounting Rate of Return nnual after-tax net incomeAnnual average investentAccounting rate of return 3,500S 27,1501= 12.891 %
2.3 Reverse innovation. What makes this potential investment risky? check bags. , ided by total investment.. total investment is current assets (inventories, accounts receivables and cash) plus fixed assets. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Compute the net present value of this investment. Amount x PV Factor = Present Value Cash Flow Annual cash flow Select Chart Present Value of an Annuity of 1 II Residual value II Net present value. The NPV is computed as: {eq}\displaystyle \text{Present value of annuity (PVA) } = P * \frac{1 - (1 + r)^{-t}}{r} {/eq}, Become a Study.com member to unlock this answer! What amount should Cullumber Company pay for this investment to earn a 12% return? The machine will cost $1,812,000 and is expected to produce a $203,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and a $23,000 salvage value. b) 4.75%. Required intormation Use the following information for the Quick Study below. If the value of leased asset is $125 and the cost of debt is 10%, what is the, The cost of capital for a firm is 10 percent. The investment costs $45,000 and has an estimated $6,000 salvage value. The net cash flows are estimated to be $7,610 per year for the next 5 years and no salvage value is anticipated. Compute this machine's accounti, On 1/1, a company buys equipment with a cost of $8,100, an estimated salvage value of $1,100, and an estimated useful life of 7 years. The investment costs $48,900 and has an estimated $12,000 salvage value. The company's desired rate of return used in the present value calculations was, A company is considering investment in a project that costs Rs. Negative amounts should be indicated by a minus sign. Compute the net present value of this investment. The company s required rate of return is 14 percent. You have the following information on a potential investment. To make this happen, the firm, Wilcox Company is considering an investment that will generate cash revenues of $120,000 per year for 8 years, and have cash expenses of $60,000 per year for 8 years. The investment costs $45,000 and has an estimated $6,000 salvage value. The annual depreciation cost is 10% of fixed capital investment. It generates annual net cash inflows of $10,000 each year. Yearly depreciation = (56,100 - 7,500) / 3 = $16,200.00. If a table of present v, Grouper Company owns equipment that cost $1,044,000 and has accumulated depreciation of $440,800. Assume Peng requires a 5% return on its investments. ), Summary of Strategic Management southern African concepts and case fourth edition, chapters 1 to 4, What of the following is not considered practice before the IRS per Circular 230? If the accounting ra, A company buys a machine for $76,000 that has an expected life of 7 years and no salvage value. Compute the accounting sane of return for this investment assume the company uses straight-line depreciation. Required information [The following information applies to the questions displayed below.] Compute the net present value of this investment. What is the average amount invested in a machine during its predicted five-year life if it costs $200,000 and has a $20,000 salvage value? The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $120,000 the first year, $140,000 the second, Assume the company requires a 10% rate of return on its investments. The following data concerns a proposed equipment purchase: Cost $136,400 Salvage value $3,600 Estimated useful life 4 years Annual net cash flows $45,700 Depreciation method Straight-line The annual average investment amount used to calculate the accounti, Landmark Company is considering an investment in new equipment costing $500,000. Assume the company uses straight-line . Createyouraccount. All, Maude Company's required rate of return on capital budgeting projects is 9%. What amount should Elmdale Company pay for this investment to earn a 12% return? Free and expert-verified textbook solutions. The investment costs $45,300 and has an estimated $7,500 salvage value. Get access to this video and our entire Q&A library, How to Calculate Net Present Value: Definition, Formula & Analysis. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. earnings equal sales minus the cost of sales These assets contribute $28,000 to annual net income when depreciation is computed on a straight-line basis. The product line is estimated to generate cash inflows of $300,000 the first year, $250,000 the second year, and $200,000 each year thereafter for ten more years. What is the accounti, A company buys a machine for $79,000 that has an expected life of 4 years and no salvage value. Compute this machine's accoun, A machine costs $300,000 and is expected to yield an after-tax net income of $9,000 each year. Use the following table: | | Present Value o. Answer is complete but user contributions licensed under cc by-sa 4.0, Peng Company is considering an investment expected to generate an average net income after taxes of $2,500 for three years. Assume the company requires a 12% rate of return on its investments. The current value of the building is estimated to be $300,000. Peng Company is considering an investment expected to generate an average net income after taxes of $2, 400 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Assume the company uses straight-line depreciation. At the beginning of 2007, the company has a deferred tax asset of $360 pertain, Your company has been presented with an opportunity to invest in a project that is summarized as follows: Investment required $60,000,000 Annual gross income $14,000,000 Annual operating Costs 5,500,000 Salvage Value after 10 years 0 The project is expec, 1. Everything you need for your studies in one place. Coins can be redeemed for fabulous Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000. Assume Peng requires a 5% return on its investments. Experts are tested by Chegg as specialists in their subject area. The present value of the future cash flows is $225,000. Required information The following information applies to the questions displayed below Peng Company is considering an investment expected to generate an average net income after taxes of $3,500 for three years. Each investment costs $480. The investment costs $45,000 and has an estimated $6,000 salvage value. Annual cash flow 7 years c. 6 years d. 5 years, The amount of the estimated average income for a proposed investment of $90,000 in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of 4 years, no residual value. 8 years b. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. 51,000/2=25,500. 0.9, Merrill Corp. has the following information available about a potential capital investment: Initial investment $1,800 000 Annual net income $200,000 Expected life 8 years Salvage value $240,000 Merrill's cost of capital 10% Assume the straight-line deprec, Drake Corporation is reviewing an investment proposal. The investment costs $45,600 and has an estimated $8,700 salvage value. First we determine the depreciation expense per year. What are the investment's net present value and inte. Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. The approximate net present value of this project, The Zinger Corporation is considering an investment that has the following data: Year 1 Year 2 Year 3 Year 4 Year 5 Investment $17,500 $4,900 Cash inflow $3,900 $3,900 $10,000 $5,900 $5,900 Cash inflows occur evenly throughout the year. The asset is recorded at $810,000 and has an economic life of eight years. Management predicts this machine has a 8-year service life and a $100,000 salvage value, and it uses str, Carla Company owns equipment that cost $1,044,000 and has accumulated depreciation of $440,800. The investment costs $45,600 and has an estimated $8,700 salvage value. (The following information applies to the questions displayed below) Part 1 of 2 Peng Company is considering an investment expected to generate an average net income after taxes of $2,100 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The initial cost and estimates of the book value of the investment at the end of the year, the net cash flows for each year, and the net income, Crane Company is considering an investment that will return a lump sum of $898, 900, 6 years from now. Negative amounts should be indicated by #12 The excess cost over the book value of an investment that is due to expected above-average earnings is labeled on the consolidated balance sheet as: a.
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