Belmont Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an almo in net operating income of $210,000. The equipment will have an initial cost of $1,000,000 and an 8-year useful life, if there is no salvag equipment, what is the accounting rate of return? Multiple Choice O O 21.0% 16.0% O 42.0% O 13.5%

Belmont Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an almo in net operating income of $210,000. The equipment will have an initial cost of $1,000,000 and an 8-year useful life, if there is no salvag equipment, what is the accounting rate of return? Multiple Choice O O 21.0% 16.0% O 42.0% O 13.5%

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7EA: A mini-mart needs a new freezer and the initial Investment will cost $300,000. Incremental revenues,...

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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?
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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)?
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Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
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