XYZ Company has an opportunity to purchase and asset that will cost the company $60,000. The asset is expected to add $12,000 per year to the company’s net income. Assuming the asset has a 5-year useful life and a zero salvage value, the unadjusted rate of return will be?
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- Cinemar Productions bought a piece of equipment for $55,898 that will last for 5 years. The equipment will generate net operating cash flows of $14,000 per year and will have no salvage value at the end of its life. What is the internal rate of return?Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
- Nguyen Company has an opportunity to purchase an asset that will cost company $59,000. The asset is expected to add $23,000 per year to the company’s net income. Assuming the asset has a five-year useful life and zero salvage value, the unadjusted rate of return based on the average investment will be ?Palmer Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $164,900. The equipment will have an initial cost of $485,000 and have a 7 year life. If the salvage value of the equipment is estimated to be $9,000, what is the accounting rate of return? Multiple Choice 34.00% 23.28% 156.37% 51.11%Assume that a company Is considering purchasing a new plece of equlpment for $240,000 that would have a useful life of 10 years and no salvage value. The new equipment would cost $20,000 per year to operate and it would replace an old plece of equipment that costs $53,000 per year to operate. The old equipment currently belng used could be sold for a salvage value of $40,000. The simple rate of return for the new equipment is closest to: Multiple Cholce 4.50%. 7.55%. 12.00%. 20.00%.
- 3. Suppose that the new equipment has a cost basis of $12,000 and a salvage value of $3,000 at the end of 6 years. This asset is depreciated by the Straight-Line method. The effective income tax rate is 40 % and the after-tax MARR ic = 10%. If the company is going to sell this asset after 3 years at the market value of $6,000, what is the minimum profit per year this asset should produce to breakeven the investment? (20%)Newport 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 $205,000. The equipment will have an initial cost of $950,000 and have a 6-year life. There is no salvage value for the equipment. If the hurdle rate is 7%, what is the approximate net present value? Ignore income taxes.Belmont Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $290,000. The equipment will have an initial cost of $1,000,000 and have an 8 year life. If there is no salvage value of the equipment, what is the accounting rate of return? Multiple Choice 21.5% 29.0% 58.0% 24.0%
- An asset with 5-year MACRS life will be purchased for $12,000. It will produce net annual benefits of$2500 per year for 6 years, after which time it will have a net salvage value of zero and will be retired.The company’s marginal tax rate is 26%. What is the after-tax rate of return?Belmont Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual A in net operating income of $210,000. The equipment will have an initial cost of $1,000,000 and an 8-year useful ife, if there is no salvage value of the equipment, what is the accounting rate of return? Multiple Choice O O 21.0% 16.0% O 42.0% O 13.5%Newport Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net cash flow of $210,000. The equipment will have an initial cost of $890,000 and a 6-year useful life with no salvage value. If the company's cost of capital is 9%, what is the net present value? (Future Value of $1 Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use the appropriate factor from the PV tables. Multiple Choice $890,000 $296,667
