A piece of equipment is to be purchased for 350,000 Php. The sales person has successful shown that it will bring the company an additional total profit of 25,000 Php per year. The owner has a MARR of 9%. By how much is the proposal less than/more than the MARR?

A piece of equipment is to be purchased for 350,000 Php. The sales person has successful shown that it will bring the company an additional total profit of 25,000 Php per year. The owner has a MARR of 9%. By how much is the proposal less than/more than the MARR?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

See similar textbooks

Related questions

Q: As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The…

A: Given information: Purchase price is $65,000 Annual sales 4,000 units at a price of $50 per unit…

Q: As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The…

A: As depreciation at t = 0 is being fully depreciated, therefore depreciation will $0.

Q: A piece of machinery is projected to provide an income of 125, 000 5000dollars per year with f in I…

A: Return on money is the amount which an investor will get for investing the amount in an investment…

Q: The owner of a business is considering investing $55,000 in new equipment. He estimates that the net…

A: a) Computation:

Q: A company will invest in a machine worth 50000$ to produce a new product. The economic life of the…

A: Net cash flows from purchase of machine will be total cash inflows generated by use of machine and…

Q: Mike made $10,000 investment in an endorser whereby he manufactures products that are easily sold at…

A: We need to determine the accumulated cost and then by using the cost per unit, we need to determine…

Q: Van Nuys Company is considering the purchase of a new machine which will cost $7,370 The machine…

A: IRR is the rate at which NPV of the project is zero.

Q: The NUBD Co. is planning to purchase a new machine. The payback period will be 6 years. The cash…

A: Pay back period means cost of asset is recovered in that period through CFAT. Therefore in the above…

Q: Raguna Co. is considering adding a new machine to its production line. The machine costs…

A: Initial cash outlay will include the total cost of machine i.e. purchase cost and installation cost,…

Q: Sams pays a delivery firm to distribute products. Delivery revenues are 30000 per year. he can buy a…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: A young mechanical engineer is considering establishing his own small comp nvestment of P400,000…

A: concept IF the rate of return is greater than the expected return then the project is justified IF…

Q: Ten years ago, Nana Recovery purchased an equipment to move disabled tractors for Php285,000. The…

A: NPV means PV of net benefits which will arise from the project over the life of the project. It is…

Q: Bailey Motors produces this kind of motor at Php 48,000 and has a useful life of 10 years. Annually…

A: Given information Cost of electricity is Php 2 per kwh Particular Company A Company B Cost…

Q: Calculate the accounting and economic profit of this firm:

A: The revenue and cost details of company has been given below:- Revenue is 100 000 rubles Raw…

Q: As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The…

A: Depreciation will be $0 as equipment at t = 0 is being depreciated fully.

Q: A young mechanical engineer is considering establishing his own small company. An investment of Php…

A: Return on capital is the percentage of net income earned on the investment. This is usually…

Q: at is the expected net income (after tax) in Year 3 if the proposed investment is undertaken? Round…

A: Summary of the relevant information provided in the question : New Machine Cost = $ 303,000 Sales…

Q: A printing press machine has a cash equivalent of P250,000. For the first three years, it will…

A: Given Investment = P 250,000 Profit each year = P20,000 MARR = 7% EARR =15%

Q: As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The…

A: NPV is the net current worth of cash flows that are expected to occur in the future. It is…

Q: The potential owner/managers of the yet to be formed new In-Line Bla Company are evaluating the…

A: Given information : Year Cash flows 0 -5500000 1 400000 2 400000 3 750000 4 750000 5…

Q: What is the Year-0 net cash flow? What are the net operating cash flows in Years 1, 2, and 3?…

A: Since you have posted a question with multiple subparts, we will solve the first three subparts for…

Q: As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The…

A: Answer of the cash flow is $73000 In worst case scenario the sales will dip to 3200 sales= 3200*50…

Q: Nick’s Enterprises has purchased a new machine tool that will allow the company to improve the…

Q: In your company-owned business, you are contemplating to purchase a new machine for $100,000 that…

A: Investment = 100,000N = 4 yearsAnnual Revenue = 10,000Rate = 15%We need a positive Net present value…

Q: An office supply company has purchased a light duty delivery truck for $15,000. It is anticipated…

A: Net present value or annual worth is the present value of all the cash flows. It is used in capital…

Q: You have been asked to make a recommendation about whether to spend $115,000 on a new Laser cutting…

A: Here, we have been given the real discount rate, which is 8%. Both salvage value and overhaul costs…

Q: Nancy’s Notions pays a delivery firm to distribute its products in the metro area. Shipping costs…

A: A discount rate at which the net present worth of an investment is equal to zero is term as an…

Q: A printing press machine has a cash equivalent of P250,000. For the first three years, it will…

A: Initial cost (C) = P 250000 Profit in year 1 (A1) = P 20000 A2 = P 20000 A3 = P 20000 A4 = P 35000…

Q: What are the revised values for the NPV? NPV Best Case Scenario = $ . NPV Base Case Scenario = $…

A: Best case scenario is the scenario when the economic conditions are good and the firm is required to…

Q: New equipment costs $847,000 and is expected to last for five years with the salvage value of 10% of…

A: The formula for the calculation of PVCCATS is as follows: PVCCATS=CdTd+k×1+0.5k1+k-SdTd+k×11+kn C is…

Q: Raguna Co. is considering adding a new machine to its production line. The machine costs RM3,000,000…

A: Annual operating cash flows = NOPAT + depreciation NOPAT is net operating profit after tax.…

Q: A company is considering purchasing a new piece of machinery at a cost $60,000. It is expected to…

A: Economic Value Added = Net Operating Profit After Tax - ( Cost of Capital * Invested Capital)

Q: 1. As a manager of Kingstown Office Supply, you intend to purchase a new copier for Php500,000,…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: The Longganisa Builders Co. agreed to pay P100,000.00 for a new bulldozer with an expected life of…

A: Increase in annual earnings (A) = P 12000 r = 12% n = 20 years

Q: Eden Publishing Company Limited is planning to purchase a printing machine for $9,660,000. The…

A: The expenses incurred to maintain the efficiency of the machinery are known as maintenance expenses.…

Q: A company is trying to decide whether to buy a machine for $ 80,000 which will saved $20000 a year…

A: IRR is the rate of return of a project where the present value of the cost of the project is equal…

Q: Macoupin Mining Inc. must purchase a new coring machine that costs $60,000 and will last 15 years…

A: Information Provided: Costs = $60,000 Salvage value = $12,000 Opearting exp = $9000( first year and…

Q: HydroKlean LLC, an environmental soil cleaning company, borrowed $3.5 million to finance startup…

A: Net present value is the technique used in capital budgeting to evaluate the acceptability of the…

Q: Assume that a money manager is considering the buy of a $35,000 machine and that he appraises that…

A: The question is to take a decision to buy a machine based on expected interest rate earing and…

Q: A man is considering putting up his own enterprise, where an investment of 800,000Php will be…

A: Solution Given Materials 160,000Php/ yearLabor 280,000Php/ yearOverhead (40,000 + 10% of sales)…

Q: Van Nuys Company is considering the purchase of a new machine which will cost $7,370. The machine…

A: Net present value: It is the difference between the present value of cash inflow and the present…

Q: A new drill press is being considered to purchased. The estimated first cost is Php 200,000. The net…

A: Present worth is the present value added by undertaking a certain option. IRR is the rate at which…

Concept explainers

Mortgages

A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.

Mortgage

The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.

Question

answer and discuss pls

A piece of equipment is to be purchased for 350,000 Php. The sales person has successful shown that it will bring the company an additional total
profit of 25,000 Php per year. The owner has a MARR of 9%. By how much is the proposal less than/more than the MARR?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

A business is considering purchasing a piece of new equipment for $200,000. The equipment will generate the following revenues: Year 1: $50,000Year 2: $50,000Year 3: $50,000Year 4: $60,000The machine can be sold at the end of the year four for $25,000. Assume a discount of 8%. 2. What is the compounded return(IRR) for this project?
A lathe costs $56,000 and is expected to result in net cash inflows of $20,000 at the end of each year for three years and then have a market value of $10,000 at the end of the third year. The equipment could be leased for $22,000 a year, with the first payment due immediately. Solve, a. If the organization does not pay income taxes and its MARR is 10%, show whether the organization should lease or purchase the equipment. b. If the lathe is thought to be worth only, say, $18,000 per year to the organization, what is the better economic decision?
A business is considering purchasing a piece of new equipment for $200,000. The equipment will generate the following revenues: year 1: $50,000 year 2: $50,000 year 3: $50,000 year 4: $60,000 The machine can be sold at the end of the year four for $25,000. Assume a discount of 8%. 1. What is the net present value (NPV)? A.) -7,890.99 B.) 7,899.99 C.) -8,667.61 D.) 9,100.51
A new drill press is being considered to purchased. The estimated first cost is Php 200,000. The net annual income is Php 75,000 the first year, which decreases by Php 12,500 each year thereafter. After 5 years, the press can be sold for Php 25,000. Should this new drill press be considered if the company uses an MARR of 10%? Use the following method to support your recommendation; PW and IRR. Compute for the PW and IRR(i)
A new drill press is being considered to purchased. The estimated first cost is Php 200,000. The net annual income is Php 75,000 the first year, which decreases by Php 12,500 each year thereafter. After 5 years, the press can be sold for Php 25,000. Should this new drill press be considered if the company uses an MARR of 10%? Use the following method to support your recommendation; PW and IRR
A business is considering purchasing a piece of new equipment for $200,000. The equipment will generate the following revenues: Year 1: $50,000Year 2: $50,000Year 3: $50,000Year 4: $60,000The machine can be sold at the end of the year four for $25,000. Assume a discount of 8%. 1. What is the net present value(NPV)?
A company is considering buying a piece of machinery that costs $20,000 and has a salvage value of $6,000 at the end of its 5-year useful life. The machinery nets $5,000 per year in annual revenues. The internal rate of return (IRR) on this investment is between__________. if the company considering purchasing the machine uses a MARR of 12%, would you recommend that it be bought?
A business is considering purchasing a piece of new equipment for $200,000. The equipment will generate the following revenues: Year 1: $50,000Year 2: $50,000Year 3: $50,000Year 4: $60,000The machine can be sold at the end of the year four for $25,000. Assume a discount of 8%. 3. Based on your above calculations, should they purchase the new piece of equipment? Why?
Paul Restaurant is considering the purchase of a RM9,300 soufflé maker. The soufflé makerhas an economic life of five years and will be fully depreciated by the straight-line method.The machine will produce 1,400 soufflés per year, with each costing RM1.97 to make andpriced at RM4.95. The discount rate is 14 percent and the tax rate is 21 percent. Calculate theNPV of the project?
A firm is considering purchasing equipment that will reduce annual costs by P 40,000. The equipment costs P 300,000 and has a salvage value of P 50,000 and a life of 7 yrs. The annual maintenance cost is P 6,000. While not in use by the firm, the equipment can be rented to others to generate an income of P 10,000 per year. If money can be invested for an 8% return, is the firm justified in buying the equipment? Use annual cost method.
A business is considering purchasing a piece of new equipment for $200,000. The equipment will generate the following revenues: Year 1: $50,000 Year 2: $50,000 Year 3: $50,000 Year 4: $50,000 The machine can be sold at the end of the year four for $25,000. Assume a discount for 8%. 1. What is the net present value (NPV)? Select one: A. -7890.99 B. 7899.99 C. -8,667.61 D. 9100.54 2. A business is considering purchasing a piece of new equipment for $200,000. The equipment will generate the following revenues: Year 1: $50,000 Year 2: $50,000 Year 3: $50,000 Year 4: $60,000 The machine can be sold at the end of the year for $25,000. Assume a discount of 8%. What is the compounded raturn (IRR) for this project?
Mr. Joseph Ramos, owner of a GYM is planning to buy an equipment worth P150,000 in his business Ramos Merchandizing. In the first year of operation, the project is expected to generate an income of P30, 000 on the second year, P29,000, on the third year P35,000, on the fourth year, P40,000 and on the fifth year P45,000. Compute the Payback Period, Net Present Value, Internal Rate of Return and submit your answer here. Hurdle rate set in this project is 14%.