The Valentine Company has decided to buy a machine costing $20,000. Estimated cash savings from using the new machine amount to $5,000 per year. The machine will have no salvage value at the end of its useful life of six years. The machine's internal rate of return is closest to: (Ignore income taxes.) a.11% b.12% c.13% d.14%
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The Valentine Company has decided to buy a machine costing $20,000. Estimated cash savings from using the new machine amount to $5,000 per year. The machine will have no salvage value at the end of its useful life of six years. The machine's
a.11%
b.12%
c.13%
d.14%
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- Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?A mini-mart needs a new freezer and the initial Investment will cost $300,000. Incremental revenues, including cost savings, are $200,000, and incremental expenses, including depreciation, are $125,000. There is no salvage value. What is the accounting rate of return (ARR)?
- Alter company's manager has proposed installing an equipment that will cost $36,000, have a 8-year life, and have no salvage value. The company estimates that the machine could produce 4000 units which can be sold evenly throughout the year. The expected income through the life of machinery is $16,000. The machine will generate net cash flows per year of $8,000. Calculate the average rate of return on the investment. a. 44.44% b. 22.22% с. 33.33% d. 11.11% Answer A B OD O O O OAlter company's manager has proposed installing an equipment that will cost $36,000, have a 8-year life, and have no salvage value. The company estimates that the machine could produce 4000 units which can be sold evenly throughout the year. The expected income through the life of machinery is $16,000. The machine will generate net cash flows per year of $8,000. Calculate the average rate of return on the investment. a. 44.44% b. 22.22% с. 33.33% d. 11.11%A snow cone machine at an ice cream shop costs $15,000. The machine is expected to generate profits of $2,500 each year of its 10-year useful life. At the end of the 10 years the machine will have a salvage value of zero. Within what interest rate range does the IRR fall? a. Less than 10% b. 10% to 12% c. 12% to 14% d. Greater than 14%.
- Nelson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $105,000. The equipment will have an initial cost of $420,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $80,000, what is the payback period? Ignore income taxes. Multiple Choice 3.24 years 4.00 years 4.76 years 7.00 yearsJason Corporation has invested in a machine that cost $80,000, that has a useful life of eight years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of five years. Given these data, the simple rate of return on the machine is closest to: A. 6.8% B. 12% C. 7.5% D. 9%29. X Corporation is considering buying a $25,000 machine. Its estimated useful life is 5 years, with no salvage value. X anticipates annual net income after taxes of $1,500 from the new machine. What is the rate of return on average investment, assuming that X uses straight-line depreciation and that the net income is earned uniformly throughout each year? A. 6.0% B. 8.0% C. 12.0% D. 26.0% E. 52.0%
- Choose the correct answer. 1. An oil refinery business ants to purchase a new machine that costs P180.000. Its useful life is five (5) years and it will have zero salvage value. It would offer the following profits to the company -YEAR- -NET PROFIT -68.000 -52,000 -45.000 -37.000 -20,000 If the discount rate is 12%, the present value of the future cash flows is: A) 158,000 B) 165,000 176,000 D) 169,080 2. In above question, the net present value is 3. In above question payback period would be about 3.40 years 4.5 years 5 years D) above 5 yearsPeng Company is considering buying a machine that will yield income of $2,400 and net cash flow of $15,100 per year for three years. The machine costs $46,200 and has an estimated $8,100 salvage value. Compute the accounting rate of return for this investment. Accounting Rate of Return Numerator: Denominator: Accounting Rate of Return Accounting rate of returnTrek Industries purchases new machinery to replace some of its old machinery. The new machinery costs $250,000, has a useful life of 15 years, and has a salvage value of $40,000. Trek sells the old machinery for $30,000. The payback period for the initial investment in the new machinery is exactly 4 years. What is the simple rate of return on the investment in the new machinery? Round to one decimal point. O 16.2% O 18.6% 22.0% Ⓒ 24.5% O None of the above