The expected net cash inflows from, A building has a cost of $750,000 and accumulated depreciation of $125,000. A machine costs $180,000, has a $12,000 salvage value, is expected to last eight years, and will generate an after-tax income of $39,000 per year after straight-line depreciation. Select Chart Amount * PV Factor - Present Value Cash Flow Annual cash flow Residual value. Using straight-line, Wildhorse Company owns equipment that costs $1,071,000 and has accumulated depreciation of $452,200. 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. Best study tips and tricks for your exams. Compute the payback period. The annual depreciation cost is 10% of fixed capital investment. (Round each present value calculation to the nearest dollar. Crispen normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 per. 8 years b. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Ignoring taxes, what is the most that the company would be willing to in, Strauss Corporation is making a $89,600 investment in equipment with a 5-year life.The company uses the straight-line method of depreciation and has a tax rate of 40 percent.The company's required rat, Strauss Corporation is making a $89,750 investment in equipment with a 5-year life.The company uses the straight-line method of depreciation and has a tax rate of 40 percent.The company's required rat, Strauss Corporation is making a $91,950 investment in equipment with a 5-year life. 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 equipment will be depreciated on a straight-line basis over 5-year life and is expected to generate net cash inflows of $45,000 the first year, $65,000 the second year, and $, The Seago Company is planning to purchase $436,400 of equipment with an estimated seven-year life and no estimated salvage value. What is the present value, Strauss Corporation is making a $87,550 investment in equipment with a 5-year life. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. The investment costs $56,100 and has an estimated $7,500 salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Assume Peng requires a 5% return on its investments. O, Reece Manufacturing Company is considering the following investment proposal: The firm uses the straight-line method of depreciation with no mid-year convention. Experts are tested by Chegg as specialists in their subject area. Assume Peng requires a 10% return on its investments. Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. 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. Assume the company uses straight-line depreciation. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Assume Peng requires a 5% return on its investments. Multiple Choice, returns on investment is computed in the following manner. Required information (The following information applies to the questions displayed below.] The investment costs $45,600 and has an estimated $6,600 salvage value Compute the accounting rate of return for this investment, assume the company uses straight-line depreciation. Management predicts this machine has a 9-year service life and a $80,000 salvage value, and it uses strai, A machine costs $200,000 and is expected to yield an after-tax net income of $5,000 each year. 1,950/25,500=7.65. Createyouraccount. The fair value of the equipment is $464,000. The company currently has no debt, and its cost of equity is 15 percent. 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. If t, Your company just bought an asset for $200,000 with an estimated useful life of 5 yrs, and a salvage value of $10,000. (Round answer to, During the year, Loon Corporation has the following transactions: $400,000 operating income; $325,000 operating expenses; $25,000 municipal bond interest; $60,000 long-term capital gain; and $95,000 short-term capital loss. The company has projected the following annual cash flows for the investment. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The following information applies to // Header code for stack // requesting to create source code Peng Company is considering an investment expected to generate an average net income after taxes of $3,000 for three years. Become a Study.com member to unlock this answer! The related cash flows, net of taxes, are ex, You have the following information on a potential investment. ), 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? The investment costs $45,000 and has an estimated $6,000 salvage value. The investment has zero salvage value. The Controller asks you to use a depreciation method that would produce the highest charge against income after three years. copyright 2003-2023 Homework.Study.com. Management predicts this machine has an 8-year service life and a $40,000 salvage value, and it uses straight-line depreciation. Axe Corporation is considering investing in a machine that has a cost of $25,000. 2003-2023 Chegg Inc. All rights reserved. Assume the company uses straight-line depreciation. ABC Company is adding a new product line that will require an investment of $1,500,000. water? What is the accountin, A company buys a machine for $62,000 that has an expected life of 7 years and no salvage value. The company anticipates a yearly net income of $3,700 after taxes of 20%, with the cash flows to be received evenly throughout each year. Management estimates the machine will yield an after-tax net income of $12,500 each year. What is the depreciation expense for year two using the straight-line method? You'll get a detailed solution from a subject matter expert that helps you learn core concepts. a. The company uses a discount rate of 16% in its capital budgeting. The investment costs $45,600 and has an estimated $8,700 salvage value. Select chart Furthermore, the implication of strategic orientation for . Peng Company is considering an investment expected to generate an average net income after taxes of $3,000 for three years. c. Retained earnings. A company purchased a plant asset for $55,000. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Assume Peng requires a 5% return on its investments. 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 % gifts. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. The asset is recorded at $810,000 and has an economic life of eight years. Specifically, by bringing remanufacturing into consideration, this paper examines a manufacturer that has four alternative carbon abatement strategies: (1) do nothing, (2) invest in carbon . Yokam Company is considering two alternative projects. Assume Peng requires a 10% return on its investments. Peng Company is considering an investment expected to generate an average net income after taxes of $3,100 for three years. 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. If the hurdle rate is 6%, what is the investment's net present value? 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. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Assume Peng requires a 15% return on its investments. Compute the net present value of this investment. Assume the company uses straight-line depreciation. The machine will generate annual cash flows of $21,000 for the next three years. The new present value of after tax cash flows from an investment less the amount invested. D. Representing a taxpayer at a hearing, Take a single physical copy of a book as a cost object. What lump-sum amount should the company invest now to have the $370,000 available at the end of the eight-year period? The investment costs $45,000 and has an estimated $10,800 salvage value. The investment costs $45,300 and has an estimated $7,500 salvage value. The investment costs $57,600 and has an estimated $6,000 salvage value. The estimated cash inflow from the project are as follows: Year Cash Inflow Present value factor at 10% 1 70,000 0.909 2 80,000 0.826 3 120,000 0.751 4 90,000 0.683 5 60,000 0.621 Ca, A company is considering investment in a Flexible Manufacturing System. It expects to generate $2 million in net earnings after taxes in the coming year. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The investment costs $45,000 and has an estimated $6,000 salvage value. Compute the net present value of this investment. To help in this, compute the cost of capital for the firm for the following: a. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be rece, A company can buy a machine that is expected to have a three-year life and a $25,000 salvage value. 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 $3,200 for three years. In the next using the GC how can i determine the ratio of diastereomers. 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. The company anticipates a yearly after-tax net income of $1,805. Note: NPV is always a sensitive problem bec. Negative amounts should be indicated by a minus sign.) It gives us the profitability and desirability to undertake the project at our required rate of return. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The Longlife Insurance Company has a beta of 0.8. an average net income after taxes of $3,200 for three years. The equipment has a five-year life and an estimated salvage value of $50,000. Determine the payout period in year. 94% of StudySmarter users get better grades. Solution: Annual depreciation = (Cost - Salvage value) / useful life = ($45,600 - $8,700) / 3 = $12,300 Annual cash i. A company has three independent investment opportunities. 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. What is the present valu, Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. The investment costs$45,000 and has an estimated $6,000 salvage value. Amount What is the present value, The Best Manufacturing Company is considering a new investment. A machine that costs $770,000 has an estimated residual value of $70,000 and an estimated useful life of 7 years. For example: What is the future value of $4,000 per ye ar for 6 years assuming an annual interest rate of 8%. Investment required $60,000,000, Salvage value after 10 years $0, Gross income $2, A company forecasts free cash flow of $40 million in three 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. The present value of the future cash flows is $225,000. What is Ronis' Return on Investment for 2015? Firm Value Young Corporation expects an EBIT of $16,000 every year forever. The company's required rate of return is 11 percent. The building is expected to generate net cash inflows of $15,000 per year for the next 30 years. The net present value is given as the present value of inflows minus the present value of outflows from the project. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. using C++ Corresponding with the IRS in writing turnover is sales div Using the factors of n = 12 and i= 5% (12 semiannual periods and a semiannual rate of 5%), the factor is 0.5568. Negative amounts should be indicated by a minus sign. Annual cash flow 2.72. The company's required rate of return is 12 percent. (Negative amounts should be indicated by a minus sign.). It expects the free cash flow to grow at a constant rate of 5% thereafter. 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. What amount should Elmdale Company pay for this investment to earn a 8% return? The company is expected to add $9,000 per year to the net income. Securities Cost Fair Value Trading 120,000 124,000 Non-trading 100,000 94,000 The non-trading securities are held as long-term investments. 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. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Management predicts this machine has a 12-year service life and a $40,000 salvage value, and it uses straight-line depreciation. (Do not round intermediate calculations.). Peng Company is considering an Investment expected to generate an average net income after taxes of $3,000 for three years. 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. The system, A machine costs $700,000 and is expected to yield an after-tax net income of $30,000 each year. 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. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. 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 uses the straight-line method of depreciation and has a tax rate of 40 per cent. Assume Peng requires a 5% return on its investments. Management estimates that this machine will generate annual after-tax net income of $540. Assume Peng requires a 5% return on its investments. Compute the accounting rate of return for this. Assume Peng requires a 5% return on its investments. X Common stock. Compute the net present value of this investment. The payback period for this investment is: a) 3.9 years b) 3 years, Hung Company accumulates the following data concerning a proposed capital investment: cash cost of $216, 236, net annual cash flows of $43,800, and present value factor of cash inflows for 10 years 5.22 (rounded). 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. Calculate its book value at the end of year 6. (20-year, 12% pr, What is the NPV and IRR for the two investments options below? Peng Company is considering an investment expected to generate an average net income after taxes of $2,100 for three years. Capital investment - $15,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow Year 1 - $7,000 Year, A company bought a machine that has an expected life of 7 years and no salvage value. Compute the payback period. Assume the company uses straight-line depreciation. Present value Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. TABLE B.1 Present Value of 1 Rate Perlods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 15% 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.8929 0.8696 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 0.7972 0.7561 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 08163 .793 0.7722 7513 7118 06575 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6355 0.5718 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5674 0.4972 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5066 0.4323 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4523 0.3759 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4039 0.3269 0.9143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3606 0.2843 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3220 0.2472 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.2875 0.2149 0.8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.4440 0.3971 0.3555 0.3186 0.2567 0.1869 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2292 0.1625 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2046 0.1413 0.8613 0.7430 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.1827 0.1229 0.8528 0.7284 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.2176 0.1631 0.1069 0.8444 0.7142 0.6050 0.5134 0.4363 0.3714 0.3166 0.2703 0.2311 0.1978 0.1456 0.0929 0.8360 0.7002 0.5874 0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.1799 0.1300 0.0808 0.8277 0.6864 0.5703 0.4746 0.3957 0.3305 0.2765 0.2317 0.1945 0.1635 0.1161 0.0703 0.8195 0.6730 0.5537 0.4564 0.3769 0.3118 0.2584 0.2145 0.1784 0.1486 0.1037 0.0611 0.7798 0.6095 0.4776 0.3751 0.2953 0.2330 0.1842 0.1460 0.1160 0.0923 0.0588 0.0304 0.7419 0.5521 0.4120 0.3083 0.2314 0.174 0.1314 0.0994 0.0754 0.0573 0.0334 0.0151 0.7059 0.5000 0.3554 0.2534 0.1813 0.1301 0.0937 0.0676 0.0490 0.0356 0.0189 0.0075 0.6717 0.4529 0.3066 0.2083 0.1420 0.0972 0.0668 0.0460 0.0318 0.0221 0.0107 0.0037 9 10 12 13 14 15 16 18 19 20 25 30 35 40 * Used to compute the present value of a known future amount. Capital investment: $15,000 Estimated useful life: 3 years Estimated salvage value: zero Estimated net cash inflow Year 1: $7,000 Year 2: You have the following information on a potential investment. The company's required r, Strauss Corporation is making an $85,900 investment in equipment with a 5-year life. View some examples on NPV. The IRR on the project is 12%. The management predicts that this machine has a 10-year services life and a $100,000 salvage value, and, The Placque Company purchased an office building for $4,555,000. Choose Numerator: Accounting Rate of Return Choose Denominator: = Accounting Rate of Return = Accounting rate of return, Required information [The following information applies to the questions displayed below.) The income tax depreciation method referred to as CCA: a) Allows a corporation some flexibility in choosing the class an asset is assigned to. 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. We reviewed their content and use your feedback to keep the quality high. What is the most that the company would be willing to invest in this, A company has a minimum required rate of return of 9%. The salvage value is defined as the estimated book value of any asset after deducting all the depreciation on the asset. EV of $1. The investment costs $56,100 and has an estimated $7,500 salvage value. The investment costs $45,000 and has an estimated $6,000 salvage value. What method, A machine costs $400,000 and is expected to yield an after-tax net income of $9,000 each year. Required information [The folu.ving information applies to the questions displayed below.) The investment costs $45,600 and has an estimated $8,700 salvage value. Determine. Capital investment $180,000 Estimated useful life 3 years Estimated salvage value 0 Estimated annual net cash inflow $75,000 Required rate of return 10% What is the net present value of the inv, If an asset costs $210,000 and is expected to have a $30,000 salvage value at the end of its 10-year life, and it generates annual net cash inflows of $30,000, the cash payback period is: a. What amount should Crane Company pay for this investment to earn an 9% return? a. Negative amounts should be indicated by a minus sign.) The payback period, You are considering investing in a start up company. straight-line depreciation Financial projections for the investment are tabulated here. For l6, = 8%), the FV factor is 7.3359. Assume the company uses The investment costs $59.100 and has an estimated $6.900 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. True, Richol Corp. is considering an investment in new equipment costing $180,000. 76,000 b. Cash Flow Annual cash flow Present Value of an Annuity of1 Residual value Present Value of 1 Select Chart Amount x PV FactorPresent Value $ 8,700 x Present value of cash inflows Immediate cash outflows Net present value 45,600 Which of, Fraser Company will need a new warehouse in eight years. The machine will cost $1,804,000 and is expected to produce a $201,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and $30,000 salvage value. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The investment costs $48,900 and has an estimated $12,000 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $54,900 and has an estimated $8,100 salvage value. Good estimates are available for the initial investment and the a, Pito Company has been in operation for several years. Required: Prepare the, X Company is thinking about adding a new product line. All other trademarks and copyrights are the property of their respective owners. The firm is in, A large, profitable corporation with net income exceed $20 million is considering the installation of a new machine that cost $100,000 with the expected salvage value of $20,000 after 4 years of usefu, A company buys a machine for $69,000 that has an expected life of 7 years and no salvage value. Prepare the journal, You have the following information on a potential investment. Using a sample of Chinese-listed firms with key soil pollution regulation from 2013 to 2020, this study utilized the Difference-in-Differences method . The investment costs $54,000 and has an estimated $7,200 salvage value. criteria in order to generate long-term competitive financial returns and . Peng Company is considering an investment expected to generate an average net income after taxes of $3,100 for three years. d. Loss on investment. 200,000. The company requires an 8% return on its investments. The company is considering an investment that would yield a cash flow of $12,000 per year for five years. Required information (The following information applies to the questions displayed below.) After inputting the value, press enter and the arrow facing a downward direction. The copyright 2003-2023 Homework.Study.com. The company anticipates a yearly net income of $3,650 after taxes of 22%, with the cash flows to be received evenly throughout each year. Peng Company is considering an investment expected to generate an average net income after taxes of. The investment costs $45,000 and has an estimated $6,000 salvage value. negative? If the accounting rate of return is 12%, what was the purchase price of the mac. The, Shep Corp. is considering a 20-year investment with a net present value of cash flows of -$20,800 and an uncertain salvage value. The company is considering an investment that would yield a cash flow of $20,000 in 5 years. Compute the net present value of this investment. The net income after the tax and depreciation is expected to be P23M per year. Ignore income taxes. QS 25-7 Computation of accounting rate of return LO P2 Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The investment costs $45,000 and has an estimated $6,000 salvage value. A company is investing in a solar panel system to reduce its electricity costs. The building is expected to generate net cash inflows of $20,000 per year for the next 30 years. 6 years c. 7 years d. 5 years. Accounting Rate of Return = Net Income / Average Investment. The fair value. #define An irrigation canal contractor wants to determine whether he The investment costs $45,300 and has an estimated $7,500 salvage value. Compute the net present value of this investment. #ifndef Stack_h The net present value (NPV) is a capital budgeting tool. The salvage value of the asset is expected to be $0. Peng Company is considering an investment expected to generate an average net income after taxes Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. Yearly depreciation = (56,100 - 7,500) / 3 = $16,200.00. A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. The company has projected the following annual cash flows f, Lt. Dan Corporation invested $80,000 in a manufacturing equipment. the accounting rate of return for this investment; assume the company uses straight-line depreciation. The investment costs $45,000 and has an estimated $6,000 salvage value. Avocado Company has an operating income of $100,000 on revenues of $1,000,000. Compute the net present value of this investment. Select Chart Amount x PV Factor = Present Value Cash Flow Annual cash flow Residual value Net present value, Required information [The folu.ving information applies to the questions displayed below.) Assume the company requires a 12% rate of return on its investments. 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!