Blossom Corporation is reviewing an investment proposal. The initial cost is $105,700. Estimates of the book value of the investmentat the end of each year, the net cash flows for each year, and the net income for each year are presented in the following schedule. Allcash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is assumed toequal its book value. There would be no salvage value at the end of the investment's life.Investment ProposalAnnualYearBook ValueCash FlowsAnnualNet Income1$70,500$44,900$9,700242,40039,20011,100320,60036,00014,20046,80029,10015,3005025,20518,405Blossom Corporation uses an 11% target rate of return for new investment proposals.1

(a). Cash Payback Period: Cash Payback Period=Years before break−even+Unrecovered amount/Cash flow…

Answered: Blossom Corporation is reviewing an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Wade Corporation is reviewing an investment proposal. The initial cost is $105,000. 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 for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Year 1 2 3 4 5 Investment Proposal Annual Book Value Cash Flows $70,000 42,000 21,000 7,000 0 $45,000 40,000 35,000 30,000 25,000 Annual Net Income $16,000 18,000 20,000 22,000 24,000 Wade Corporation uses a 15% target rate of return for new investment proposals. a. What is the cash payback period for this proposal? b. What is the annual rate of return for the investment? c. What is the net present value of the investment?
Crane Corporation is reviewing an investment proposal. The initial cost is $104,600. 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 for each year are presented in the following schedule. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is assumed to equal its book value. There would be no salvage value at the end of the investment's life. Year 1 2 3 4 5 Book Value Investment Proposal $69,900 41,000 (b) 21,000 7,600 0 Annual Cash Flows Click here to view PV table. Cash payback period $46,000 40,600 36,000 31,000 24,220 Annual Net Income $11,300 11,700 Crane Corporation uses an 11% target rate of return for new investment proposals. Annual rate of return for the investment 16,000 17,600 (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) 16,620 3 years What is the annual rate of return…
Drake Corporation is reviewing an investment proposal. The initial cost is $105,700. 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 for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is assumed to equal its book value. There would be no salvage value at the end of the investment's life. Year 1 2 3 4 Investment Proposal Book Value $70,500 42,400 20,600 6,800 Annual Annual Cash Flows Net Income $9,700 11.100, $44,900 39.200 36,000 29,100 25,205 14,200 15,300 18,405 Drake Corporation uses an 11% target rate of return for new investment proposals. Click here to view the factor table. SU
Drake Corporation is reviewing an investment proposal. 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 for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment’s life. Investment Proposal Year Initial Costand Book Value AnnualCash Flows AnnualNet Income 0 $105,900 1 69,300 $44,100 $7,500 2 42,600 40,300 13,600 3 20,000 35,000 12,400 4 6,500 29,800 16,300 5 0 24,400 17,900 Drake Corporation uses an 11% target rate of return for new investment proposals.(a)What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) Cash payback…
Metro Car Washes, Inc., is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Year 0 1 2 3 Initial Cost and Book Value $240,000 160,000 96,000 48,000 16,000 Annual Net After-Tax Cash Flows Exercise 16-37 Part 3 $103,000 89,000 75,000 61,000 47,000 Annual Net Income $23,000 25,000 27,000 29,000 31,000 Management uses a 14 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) 3. Compute the proposal's net present value. (Round intermediate calculations to the nearest whole dollar.) Net present value
! Required information [The following information applies to the questions displayed below.] Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Year 0 1 2 3 4 5 Initial Cost and Book Value $315,000 210,000 126,000 63,000 21,000 0 Annual Net After-Tax Cash Flows $138,000 119,000 100,000 81,000 62,000 3. Compute the proposal's net present value. Annual Net Income Management uses a 12 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Answer is complete but not entirely correct. Net present $ 70,475 X…
Mountain Frost is considering a new project with an initial cost of $205,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $20,000, $20,900, $24,600, and $16,900, respectively. What is the average accounting return? Please make sure its correct
Required information [The following information applies to the questions displayed below.] Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Year 0 1 2 3 4 5 Initial Cost and Book Value $345,000 230,000 138,000 69,000 23,000 0 Annual Net After-Tax Cash Flows $162,000 141,000 120,000 99,000 78,000 Annual Net Income $47,000 49,000 51,000 53,000 55,000 Management uses a 14 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the project's payback period. Assume that the cash flows in…
Mountain Frost is considering a new project with an initial cost of $180,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $19,500, $20,400, $24,600, and $16,400, respectively. What is the average accounting return?
3. Kansas Corporation is reviewing an investment proposal that has an initial cost of $70,500. An estimate of the investment's end-of-year book value, the yearly after-tax net cash inflows, and the yearly net income are presented in the schedule below. Yearly after-tax net cash inflows include savings from the depreciation tax shield. The investment's salvage value at the end of each year is equal to book value, and there will be no salvage value at the end of the investment's life. Yearly After-Tax Net cash Inflows Yearly Net Income $ 8,500 9,500 10,500 11,500 12,500 Initial Cost and Book Value Year $41,000 27,000 16,500 9,500 $ 26,000 23,500 21,000 18,500 16,000 2 3 4 $105,000 $52,500 Kansas uses a 14% after-tax target rate of return for new investment proposals. PV of $1 at 14% FV of $1 at 14% 1.140 1.300 1.482 1.689 1.925 2.195 FV of an ordinary annuity at 14% 1.000 2.140 3.440 4.921 6.610 8.536 PV of an ordinary annuity at 14% Year 0.877 0.769 0.675 0.592 0.519 0.456 0.877 1.647…
Bridgeport Company is considering two capital expenditures. Relevant data for the projects are as follows: Project Initial investment Annual cash inflow Life of project Salvage value A $260,084 $46,590 Project A 7 years $0 Project B Click here to view the factor table. Bridgeport Company uses the straight-line method to depreciate its assets. B $278,237 Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.) $44,540 9 years $0 Internal rate of return % %
XYZ is evaluating a project that would require the purchase of a piece of equipment for $580,000 today. During year 1, the project is expected to have relevant revenue of $756,000, relevant costs of $199,000, and relevant depreciation of $136,000. XYZ would need to borrow $580,000 today to pay for the equipment and would need to make an interest payment of $30,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $322,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 19.95% but less than 24.42% A rate equal to or greater than 28.03% but less than 37.53% A rate equal to or greater than 37.53% but less than 51.10% A rate equal to or greater than 24.42% but less than 28.03% A rate less than 19.95% or a rate greater than 51.10%

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