VaibhavSub: accounting Determine the cash payback period. (Ignore income taxes.) (Round answer to 3 decimal places, eg.Cash payback period(b)eTextbook and MediaYour answer is incorrect.5:435Annual rate of returnyearsCalculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.)Attempts: 2 of 3 used Blossom Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. Thefollowing information has been collected on this investment:CostOld EquipmentAccumulated depreciationRemaining lifeCurrent salvage valueSalvage value in 8 yearsAnnual cash operating costs$80,400$41,7008 years$10,680$0$36,000CostNew EquipmentEstimated useful lifeSalvage value in 8 yearsAnnual cash operating costs$38,4008 years$5,000$30,900Depreciation is $10,050 per year for the old equipment. The straight-line depreciation method would be used for the new equipmentver an eight-year nerind with salvage value of $5.000.

Cost of New machine $38,400 Salvage value of old machine $10,680 Annual cash operating cost of…

Answered: Blossom Inc. is considering modernizing…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 15P

See similar textbooks

Similar questions

Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. Dunedin buys equipment frequently and wants to print a depreciation schedule for each assets life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.
Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?
Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.
Crane Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Machine A Machine B Original cost $113,900 $278,300 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,100 Estimated annual cash outflows $7,600 $14,800 Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. Machine A Machine B Net present value top row, profitability index bottom row Which machine should be purchased? Crane Corp. should purchase select a machine .
Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,640 $40.600 8 years $10,400 $0 $35,100 New Equipment Cost Estimated useful life Salvage value in 8 years Annual cash operating costs $39,000 8 years $4,600 $29.900 Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600.
Skysong Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset $11,400 Book value of old asset $2,000 Selling price of old asset $2,000 Purchase price of new replacement asset $19.900 Estimated salvage value of new asset $1,900 Estimated useful life of new asset Estimated annual net operating cash inflows 5 years $3,000/year for 5 years Discount rate Tax rate 11% 20%
The Xenia Corporation is considering replacing one of its hand-operated assembly machines with a new fully automated machine. Based on the information given in the following table determine the cash flows associated with this replacement Keep Machine operator Maintenance cost Cost of defects Depreciable value of old machine Depreciation Expected life Age Salvage value in 5 years Current salvage value Tax rate $25,000 per year $2000 per year $6000 $50,000 $5000 per year 10 years 5 years old Zero $5000 34 percent Replace Cost of new machine Installation fee Transportation charge Maintenance cost Expected life Salvage value Depreciation method $60,000 $3,000 $3,000 $3,000 per year 5 years $20,000 Straight-line
Mr. Adamson is planning to acquire a new Cold Room to replace its existing unit which they use to preserve their goods. Pertinent data are given below. for existing Cold Room: for new Cold Room: Investment P580, 000.00 P1,025, 000.00 Life 5 years remaining 12 years Salvage Value P20,600.00 P25,000.00 Variable Cost P232,000.00 P35,000.00 per year Which is profitable if money is worth 10%?
Swifty Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Machine A Machine B Original cost $113,400 $270,000 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,400 Estimated annual cash outflows $7,500 $15,000 (a) Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71. Enter negative amounts using either a negative sign preceding the number e.g. -45.35 or parentheses e.g. (45.35).) Machine A Machine B
Deep Mines Ltd. of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: 8013403 Cost of new equipment and timbers $264,000 Morking capital required Net annual cash receipts 91,000 122,000 Cost to construct new roads in three years Salvage value of equipment in four years 46,000 50,000 "Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance and so forth. It is estimated that the mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's discount rate is 20%. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1-6. Determine the NPV of the…
Current Attempt in Progress Sheridan Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,000 $40,000 8 years $9,800 Annual rate of return $0 eTextbook and Media $35,000 Your answer is incorrect. Cost New Equipment Estimated useful life Salvage value in 8 years Annual cash operating costs Depreciation is $10,000 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,400. Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.) $39,000 % 8 years $4,400 $29,000 Save for Later Last saved 2 days ago. Saved work will be auto-submitted on the due date. Auto- submission can take up to 10 minutes. Using…
Quary Company is considering an investment in machinery with the following information. Initial investment Useful life Salvage value Expected sales per year (a) Compute the investment's annual income and annual net cash flow. (b) Compute the investment's payback period. Required A Required B Complete this question by entering your answers in the tabs below. $ 335,000 9 years $ 20,000 16,750 units Annual Amounts Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Selling price per unit Compute the investment's annual income and annual net cash flow. Expenses Income Net cash flow $ 75,375 35,000 8,375 $ 10

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Managerial Accounting: The Cornerstone of Busines…

Accounting

ISBN:

9781337115773

Author:

Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Managerial Accounting: The Cornerstone of Busines…

Accounting

ISBN:

9781337115773

Author:

Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:

Cengage Learning

Excel Applications for Accounting Principles

Accounting

ISBN:

9781111581565

Author:

Gaylord N. Smith

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS