MΟΣMuBonita Inc. is considering purchasing a machine that costs $192000 and is estimated to have no salvage value at the end of its 4-yearuseful life. The straight-line method of depreciation is to be used. Projected annual cash inflows and outflows are as follows:ViExpected AnnualExpected AnnualYearCash InflowsCash Outflows1$79000$22000297000320003104000.3400048400027000The cash payback period isO 2.25 years.O2.59 years.O 3.00 years.O 3.20 years.MuzoQuMult좋은QuMul좋은좋은QuMulQueMulti

Cash Payback pertains to the amount of time for the initial investment to be recovered through a…

Answered: M ΟΣ Mu Bonita Inc. is considering…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 6CE

See similar textbooks

Similar questions

Acme Ltd, a scrap metal dealer, is considering the acquisition of a 'Roadrunner' metal compactor at the cost of $25,000. The compactor is estimated to have zero value at the end of its five-year life. It will return the following annual net cash flows. Year 1 2 3 4 5 O $4,977 O - $4,977 O $6,652 Net cash flow ($) O -$6,652 6000 10,000 12,000 Depreciation is $5000 per annum and the company tax rate is 40 per cent. Compute the project's NPV. If the project's after-tax required rate of return is 8 per cent per annum, should the project be adopted? 15,000 7000
Longmont Corporation is considering the purchase of a machine costing $44,000 with a 5-year useful life and no salvage value. Longmont uses straight- line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Longmont's average investment? Multiple Choice $26,400. $44,000. O $10,560. $8,800. $22,000.
Crane's Custom Construction Company is considering three new projects, each requiring an equipment investment of $27,280. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $8,680 $12,400 $16,120 2 11,160 12,400 14,880 3 14,880 12,400 13,640 Total $34,720 $37,200 $44,640 The equipment's salvage value is zero, and Crane uses straight-line depreciation. Crane will not accept any project with a cash payback period over 2 years. Crane's required rate of return is 12%. Click here to view PV table. (a) Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) AA BB BB years years CC years
A company is considering purchasing a machine that costs $400,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses exclusive of depreciation expenses are expected to be $38,000. The straight-line method of depreciation would be used. The cash payback period on the machine is: Select one: a. 33.3 years b. 30 years c. 4.5 years d. 6.45 years e. 3.2 years f. 6
Tucker Manufacturing is considering investing in specialized equipment costing $844,000. The equipment has a useful life of five years and a residual value of $74,000. Depreciation is calculated using the straight−line method. The expected net cash inflows from the investment are given below: Year 1 $311,000 2 352,000 3 363,000 4 190,000 5 237,000 Total $1,453,000 What is the average amount invested? A. $459,000 B. $726,500 C. $422,000 D. $385,000
A manufacturer is contemplating the purchase of either of two machines at a cost of Kshs 155 million and Kshs 180 million respectively. The machines will generate cashflows receivable at the end of each respective year as follows. Machine B cashflows (millions) cashflows (millions) a) Year Machine A 1 55 90 2 35 85 3 (35) 55 4 68 46 72 37 41 Machine A has an estimated salvage value of Kshs 10 million at the end of year six. Machine B would cost jambo an estimated Kshs 10 million to dispose off at the end of year five. Jambo has a cost of capital of 15 percent per annum. i) Using NPV approach, advice jambo as to which of the machines it should invest in. ii) Due to the likelihood of technological changes, jambo would prefer to invest in exceeding four years. Using the discounted payback approach, which machine if any should jambo invest in. machines with a payback period not iii) When is the modified IRR appropriate to be used in capital budgeting decisions Swipe up for filters Add a…
Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $ 22,660. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $7,210 $ 10,300 $ 13,390 9,270 10,300 12,360 3 12,360 10,300 11,330 Total $ 28,840 $ 30,900 $ 37,080 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. Click here to view the factor table. (a) Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) AA years BB years CC years Which is the most desirable project? The most desirable project based on payback period is Which is the least desirable project? The least desirable project based on payback period is (b) Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or…
The Xenia Corporation is considering replacing one of its hand-operated assembly machines with a new fully automated machine. Based on the information given in the following table determine the cash flows associated with this replacement Keep Machine operator Maintenance cost Cost of defects Depreciable value of old machine Depreciation Expected life Age Salvage value in 5 years Current salvage value Tax rate $25,000 per year $2000 per year $6000 $50,000 $5000 per year 10 years 5 years old Zero $5000 34 percent Replace Cost of new machine Installation fee Transportation charge Maintenance cost Expected life Salvage value Depreciation method $60,000 $3,000 $3,000 $3,000 per year 5 years $20,000 Straight-line
a manufacturing company bought a new machine for $150,000. the machine will last ten years and will be depreciated using the straight-line method. the estimate salvage value of the machineis zero and should generate a yearly cash inflow of $39,000 Requirement: what is the accounting rate of return? (ignoring taxes)
Wright Corp. is considering the purchase of a new plece of equipment, which would have an initial cost of $1,000,000 and a 5-year life. There is no salvage value for the equipment. The increase in cash flow each year of the equipment's life would be as follows: $ 377,000 $ 352,000 $ 287,000 $ 232,000 $ 187,000 Year 1 Year 2 Year 3 Year 4 Year 5 What is the payback perlod? Multiple Cholce 2.37 years 2.94 years 2.98 years 3.49 years
The Lana company is planning to purchase a machine known as machine D. Machine D would cost $ 28580 and would have a useful life of 5 years with zero salvage value. The expected annual cash inflow of the machine is $ 9529. Answer:
Equipment will be purchased at a cost of P250,000. It will have no salvage value. The cash flows are expected to be: P37,000, P48,000, P65,000, P71,000, P73,000, and P53,000 over the life of the equipment. What is the payback period? Group of answer choices 3.43 years 6.00 years 5.25 years 4.40 years

SEE MORE QUESTIONS

Recommended textbooks for you

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning