Jimmy Co. seeks to earn an average rate of return of 18% on all capital projects. Peng Company is considering an investment expected to generate an average net income after taxes of $2, 400 for three years. The management of Bischke Corporation is investigating an investment in equipment that would have a useful life of 8 years. Compute the net present value of this investment. Solution: Annual depreciation = (Cost - Salvage value) / useful life = ($45,600 - $8,700) / 3 = $12,300 Annual cash i. Experts are tested by Chegg as specialists in their subject area. Enter the email address you signed up with and we'll email you a reset link. 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. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. A company is investing in a solar panel system to reduce its electricity costs. The investment costs $45,000 and has an estimated $6,000 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $3,100 for three years. The investment costs $47,400 and has an estimated $8,400 salvage value. Assume Peng requires a 10% return on its investments. Required information [The following information applies to the questions displayed below.) Melton Company's required rate of return on capital budgeting projects is 16%. The building is expected to generate net cash inflows of $20,000 per year for the next 30 years. Ass, Peng Company is considering an Investment expected to generate an average net income after taxes of $3,000 for three years. All rights reserved. The current value of the building is estimated to be $120,000. The company's required rate of return is 10% for this class of asset. 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. If a potential investments internal rate of return is above the companys hurdle rate, should the investment be made? 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. Strauss Corporation is making an $89,000 investment in equipment with a 5-year life. The amount to be invested is $100,000. Compute the net present value of this investment. What is the present value, Strauss Corporation is making a $91,800 investment in equipment with a 5-year life. Compute the accounting sane of return for this investment assume the company uses straight-line depreciation. The initial outlay of the project would be $800,000 and the project's assets would have a residual value of $50,000 at the end o. distributed with a mean of 78 when mixing oil and water is the change in entropy positive or Sign up for free to discover our expert answers. Justice has long been an important aspect in managing and ensuring long-term successful buyer-supplier relationships because it is capable of explaining and predicting a wide range of relevant behaviours, attitudes and outcomes in such relationships (Alghababsheh et al., 2022; Griffith et al., 2006).It encompasses three dimensions in the buyer-supplier relationship, namely distributive . (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Calculate its book value at the end of year 10. The company is considering an investment that would yield an after-tax cash flow of $30,000 in four years. a. Determine the payout period in year. c) 6.65%. 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 %
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. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The present value of the future cash flows at the company's desired rate of return is $100,000. What makes this potential investment risky? The cost of capital is 6%. The investment costs $45,000 and has an estimated $6,000 salvage value. (Round your computations and answers to 0 decimal p, BAP Corporation is reviewing an investment proposal. The payback period, You are considering investing in a start up company. Peng Company is considering an investment expected to generate an average net income after taxes of $2,700 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. The company anticipates a yearly net income of $2,950 after taxes of 34%, with the cash flows to be received evenly throughout each year. The investment costs $54,000 and has an estimated $7,200 salvage value. Determine. Presented below is 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, an, Ahnen Company owns the following investments. A. copyright 2003-2023 Homework.Study.com. FV of $1. $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. The cost of the investment is. Calculate the payback period for the proposed e, You have the following information on a potential investment. Assume Peng requires a 15% return on its investments. b) Ignores estimated salvage value. The investment costs $45,000 and has an estimated $10,800 salvage value. 8. Yearly cash inflows = 3,300 + 16,200 = Our experts can answer your tough homework and study questions. Peng Company is considering an investment expected to generate an average net income after taxes of $2,000 for three years. To find the NPV using a financial calacutor: 1. Compute this machines accounting rate of return. The estimated life of the machine is 5yrs, with no salvage value. Yearly net cash inflows (before taxes) from the machine are estimated at $140,000. 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, Drake Corporation is reviewing an investment proposal. 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. (PV of. 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 investment costs $45,000 and has an estimated $6,000 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. If a table of present v, A company can buy a machine that is expected to have a three-year life and a $29,000 salvage value. The expected average rate of return, giving effect to depreciation on investment is 15%. You can expect revenues net of any expense, except machine costs, of $150,000 at the end of each year for five years. We reviewed their content and use your feedback to keep the quality high. The system is expected to generate net cash flows of $13,000 per year for the next 35 years. First we determine the depreciation expense per year. Assume Peng requires a 10% return on its investments. Assume Peng requires a 15% return on its investments. Assume the company uses straight-line depreciation. 76,000 b. This site is using cookies under cookie policy . Management predicts this machine has an 8-year service life and a $60,000 salvage value, and it uses straight-line depreciation. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. A company invests $175,000 in plant assets with an estimated 25-year service life and no salvage value. Management estimates that this machine will generate annual after-tax net income of $540. TABLE B.3 Present Value of an Annuity of 1 Rat Periods 1% 2% 4% 5% 6% 7% 5% 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 1.9704 1.9416 1.9135 1.88611.8594 1.8334 8080 1.7833 1.759 .7355 16901 1.6257 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.4869 2.4018 2.2832 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 3.0373 2.8550 3.9927 3.8897 3.7908 3.6048 3.3522 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.1114 3.7845 5.3893 5.2064 5.0330 4.8684 4.5638 4.1604 7.6517 7.3255 7.0197 6.73276.4632 6.2098 5.9713 5.7466 5.5348 5.3349 4.9676 4.4873 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 5.7590 5.3282 4.7716 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.6502 5.0188 7.1390 6.8052 6.4951 5.93775.2337 11.255 10.5753 9.95409.3851 8.8633 8.3838 7.9427 7.5361 7.1607 6.8137 6.1944 5.4206 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 7.4869 7.1034 6.4235 5.5831 13.0037 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 8.2442 7.7862 7.3667 6.6282 5.7245 13.8651 .8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 8.0607 7.6061 6.8109 5.8474 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514 8.3126 7.8237 6.9740 5.9542 15.5623 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.1196 6.0472 16.3983 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.2497 6.1280 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.3658 6.1982 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.4694 6.2593 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.8226 9.0770 7.8431 6.4641 25.8077 22.3965 19.6004 17.2920 5.3725 13.7648 12.4090 11.2578 10.2737 9.4269 8.0552 6.5660 29.4086 24.9986 21.4872 18.6646 16.3742 14.4982 12.9477 11.6546 10.5668 9.6442 8.1755 6.6166 32.8347 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574 9.7791 8.2438 6.6418 4.8534 4.7135 4.57974.4518 4.3295 4.2124 4.1002 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 10.3676 9.7868 26 8.7605 8.3064 7.8869 7.4987 12 13 14 15 16 19 20 25 30 35 40 Used to calculate the present value of a series of equal payments made at the end of each period. Accounting Rate of Return = Net Income / Average Investment. The investment costs $45,000 and has an estimated $6,000 salvage value. The investment costs $49,000 and has an estimated $8,800 salvage value. The investment costs $58, 500 and has an estimated $7, 500 salvage value. The company is considering an investment that would yield a cash flow of $20,000 in 5 years. (PV of $1. Required information Use the following information for the Quick Study below. What are the appropriate labels for classifying the relationship between this cost item and th The net present value is given as the present value of inflows minus the present value of outflows from the project. , e to the IRS about a taxpayer ROI is equal to turnover multiplied by earning as a percent of sales. The investment costs $45,000 and has an estimated $6,000 salvage value. 15900 Best study tips and tricks for your exams. Using the original cost of the asset, the unadjusted rate of return on, A machine costs $600,000 and is expected to yield an after-tax net income of $23,000 each year. To help in this, compute the cost of capital for the firm for the following: a. True, Richol Corp. is considering an investment in new equipment costing $180,000. Required information [The following information applies to the questions displayed below.) Assume Pang requires a 5% return on its investments. Assume the company uses straight-line depreciation. Transcribed image text: Peng Company is considering an investment expected to generate an average net income after taxes of $2, 400 for three years. Compute the payback period. The expected future net cash flows from the use of the asset are expected to be $595,000. If the hurdle rate is 6%, what is the investment's net present value? During those years the company has been profitable, and it expects to continue to be profitable in the foreseeable future. Management predicts this machine has a 10-year service life and a $100,000 salvage value, and it uses straight-line depreciation. Compute the, A company is considering the following investment project: Capital outlay $200,000 Net Profit p.a. Babirusa Company is considering the following investment: Initial capital investment $175,000 Estimated useful life 3 years Estimated disposal value in 3 years $25,000 Estimated annual savings in cas, Sunset Inc. is trying to determine if they should invest in a new machine that would be more efficient and would generate an annual profit of $100,000 (after tax). Axe Corporation is considering investing in a machine that has a cost of $25,000. Required intormation Use the following information for the Quick Study below. 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. You can specify conditions of storing and accessing cookies in your browser, Peng Company is considering an investment expected to generate an average net income after taxes of $2,600 for three years. Compute the net present value of this investment. What is Roni, You are considering an investment in First Allegiance Corp. The investment costs $45,000 and has an estimated $6,000 salvage value. Createyouraccount. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The expected future net cash flows from the use of the asset are expected to be $580,000. The investment costs $45,000 and has an estimated $6.000 salvage value. Calculate its book value at the end of year 6. a. The fair value. For ex ample: What is the present value of $2,000 per year for 10 years assuming an annual interest rate of 9%. 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 Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. Using a sample of Chinese-listed firms with key soil pollution regulation from 2013 to 2020, this study utilized the Difference-in-Differences method . (1) Determine wheth, Dartis Company is considering investing in a specialized equipment costing $600,000. Assume Peng requires a 5% return on its investments. For l6, = 8%), the FV factor is 7.3359. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Prepare the journal, You have the following information on a potential investment. The asset has no salvage value. A machine that costs $770,000 has an estimated residual value of $70,000 and an estimated useful life of 7 years. The company has projected the following annual cash flows for the investment. The business environment, namely market uncertainty and competition intensity, is also analysed in association with the firm's strategic orientation. The company uses the straight-line method of d, Determine Present Value: You can invest in a machine that costs $500,000. Assume the company uses straight-line depreciation. The cost of the asset is $120,000, Babirusa Company is considering the following investment: Assume straight-line depreciation is used. All rights reserved. View some examples on NPV. Negative amounts should be indicated by a minus sign.) The profitability index for this project is: a. Peng Company is considering an Investment expected to generate an average net income after taxes of $3,000 for three years. The investment costs $45,300 and has an estimated $7,500 salvage value. value. Capital investment $900,000 Estimated useful life 6 years Estimated salvage value zero Estimated annual net cash inflow $213,000 Required, Sparky Company invested in an asset with a useful life of 5 years. Common stock. Compute 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 $2,700 for three years. A company is deciding to invest in a new project at a cost of $2 million dollars. Amount Management estimates the machine will yield an after-tax net income of $12,500 each year. Compute the net present value of this investment. c. Retained earnings. The machine will cost $1,780,000 and is expected to produce a $195,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and a $33,000 salvage value. The company uses the straight-line method of depreciation and has a tax rate of 40 per cent. Compu, Lanyard Company is considering an investment that will generate $600,000 in cash inflows per year for 7-years and has $240,000 of cash outflows for the same period (before income taxes). What amount should Cullumber Company pay for this investment to earn a 12% return? 8 years b. Compute the net present value of this investment. Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. What is the accountin, A company buys a machine for $62,000 that has an expected life of 7 years and no salvage value. Anglemenesis Company is planning to spend $84,000 for a new machine that is to be depreciated on a straight-line basis over 10 years with no salvage value. The payback period for this investment Is: a) 3 years b) 3.8 years c) 4, A company is contemplating investing in a new piece of manufacturing machinery. Accounting Rate of Return Choose Denominator: Choose Numerator: 7 = Accounting Rate of Return = Accounting rate of return, Required information [The following information applies to the questions displayed below.] The investment costs $51,900 and has an estimated $10,800 salvage value. 2003-2023 Chegg Inc. All rights reserved. (20-year, 12% pr, What is the NPV and IRR for the two investments options below? (FV of |1, PV of $1, FVA of $1 and PVA of $1). Negative amounts should be indicated by a minus sign. The investment costs $49,500 and has an estimated $10,800 salvage value. TABLE B.4 f= [(1 + i)"-1Vi Future Value of an Annuity of 1 Rate Periods 1% 2% 3% 6% 7% 8% 9% 10% 12% 15% 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 0000 .0000 1.0000 10000 2.0100 2.0200 2.0300 2.0400 2.0500 2.0600 2.0700 2.0800 2.0900 2.1000 2.1200 3.0301 3.0604 3.0909 3.1216 3.1525 3.1836 3.2149 3.2464 3.2781 3.3100 3.3744 4.0604 4.1216 4.1836 4.2465 4.3101 4.3746 4.4399 5.1010 5.2040 5.3091 5.4163 5.5256 5.6371 5.7507 5.8666 5.9847 6.1051 6.3528 6.1520 6.3081 6.4684 6.6330 6.8019 6.9753 7.1533 7.3359 7.5233 7.7156 8.1152 7.2135 7.4343 7.6625 7.8983 8.1420 8.3938 8.6540 8.9228 9.2004 9.4872 10.0890 8.2857 8.5830 8.8923 9.2142 9.5491 9.8975 10.2598 10.6366 11.0285 11.4359 12.2997 9.3685 9.7546 10.1591 10.5828 11.0266 11.4913 11.9780 12.4876 13.0210 13.5795 14.7757 1.0000 2.1500 3.4725 4.9934 6.7424 8.7537 11.0668 4.5061 4.5731 4.6410 4.7793 16.7858 10 10.4622 10.9497 11.4639 12.0061 12.5779 13.1808 13.8164 14.4866 15.1929 15.9374 17.5487 20.3037 11.5668 12.1687 12.8078 13.4864 14.2068 14.9716 15.7836 16.6455 7.5603 18.5312 20.6546 24.3493 12.6825 13.4121 14.1920 15.0258 15.9171 16.8699 17.8885 18.9771 20.1407 21.3843 24.1331 12 13 13.8093 14.6803 15.6178 16.6268 17.7130 18.8821 20.1406 21.4953 22.9534 24.5227 28.0291 14 14.9474 15.9739 17.0863 18.2919 19.5986 21.0151 22.5505 24.2149 26.0192 27.9750 32.3926 40.5047 15 16 17.2579 18.6393 20.1569 21.8245 23.6575 25.6725 27.8881 30.3243 33.0034 35.9497 42.7533 55.7175 17 18.4304 20.0121 21.7616 23.6975 25.8404 28.2129 30.8402 33.7502 36.9737 40.5447 48.8837 65.0751 18 19 20.8109 22.8406 25.1169 27.6712 30.5390 33.7600 37.3790 41.4463 46.0185 51.1591 63.4397 88.2118 20 22.0190 24.2974 26.8704 29.7781 33.0660 36.7856 40.9955 45.7620 51.1601 57.2750 72.0524 102.4436 25 30 35 41.6603 49.9945 60.4621 73.6522 90.3203 111.4348 138.2369 172.3168 215.7108 271.0244 431.6635 40 48.8864 60.4020 75.4013 95.0255 120.7998 154.7620 199.6351 259.0565 337.8824 442.5926 767.0914 1,779.0903 29.0017 34.3519 16.0969 7.2934 18.5989 20.0236 21.5786 23.2760 25.1290 27.1521 29.3609 31.7725 37.2797 47.5804 19.6147 21.4123 23.4144 25.6454 28.1324 30.9057 33.9990 37.4502 41.3013 45.5992 55.7497 75.8364 28.2432 32.0303 36.4593 41.6459 47.7271 54.8645 63.2490 73.1059 84.7009 98.3471 133.3339 212.7930 34.7849 40.5681 47.5754 56.0849 66.4388 79.0582 94.4608 113.2832 136.3075 164.4940 241.3327 434.7451 881.1702 Used to calculate the future value of a series of equal payments made at the end of each period. A new operating system for an existing machine is expected to cost $690,000 and have a useful life of six years. Required: Prepare the, X Company is thinking about adding a new product line. Assume Peng requires a 5% return on its investments. If the accounting rate of return is 12%, what was the purchase price of the mac. The following information applies to // Header code for stack // requesting to create source code What is the present valu, Strauss Corporation is making an $85,200 investment in equipment with a 5-year life. Assume all sales revenue is received, Elmdale Company is considering an investment that will return a lump sum of $769,700, 7 years from now. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. ABC Company is adding a new product line that will require an investment of $1,500,000. a) construct an influence diagram that relates these variables A bond that has a $1,000 par value (face value) and a con, Strauss Corporation is making a $70,000 investment in equipment with a 5-year life. Equity method b. Good estimates are available for the initial investment and the a, Pito Company has been in operation for several years. The investment costs $45,600 and has an estimated $8,700 salvage value. 200,000. What is the payback period in years ap, The Montana Company has decided to invest in a project that is expected to produce the following cash flows: $12,500 (year 1), $14,000 (year 2) and $9,000 (year 3). A machine costs $210,000, has a $16,000 salvage value, is expected to last nine years, and will generate an after-tax income of $47,000 per year after straight-line depreciation. 2003-2023 Chegg Inc. All rights reserved. Note: NPV is always a sensitive problem bec. The expected net cash inflows from, A building has a cost of $750,000 and accumulated depreciation of $125,000. Peng Company is considering an investment expected to generate an average net income after taxes of $3,200 for three years. Required information Use the following information for the Quick Study below. What is the most that the company would be willing to invest in this project? 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%.