Franklin Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation, Thereafter, it would be leased to the general public on demand. Franklin would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Nature of Item Cash Inflow Cash Outflow Purchase price $86,800 Year 1 Revenue $33,500 Year 2 Revenue 33,500 Year 3 Revenue 28,500 Year 3 Major overhaul 8,700 Year 4 Revenue 19,500 Year 5 Year 5 Revenue 17,500 Salvage value 7,500 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. Note: Round your answers to 1 decimal place. a. Payback period (accumulated cash flows) b. Payback period (average cash flows) years years
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- Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift.would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Nature of Item Purchase price Cash Outflow $99,000 Year Cash Inflow Year 1 Year 1 $40,000 40,000 29,000 Revenue Year 2 Revenue Year 3 Revenue Major overhaul Revenue 10,000 Year 3 Year 4 Year 5 Year 5 26,000 24,000 8,800 es Revenue Salvage value Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.) a. Payback period (accumulated cash flows) b. Payback period (average cash flows) years yearsSolomon Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Solomon would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Year 1 Year 2 Year 3 Year 3 Year 4 Year 5 Year 5 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Salvage value Cash Inflow $37,000 37,000 26,000 23,000 21,000 8,200 Cash Outflow $90,600 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 9,400 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. Note: Round your answers to 1 decimal place. years years
- Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Year 1 Year 2 Year 3 Year 4 Year 5 Annual Net Cash Flows $ 40,000 $ 40,000 $ 35,000 $ 35,000 $ 30,000 Compute the payback period for this investment. (Round to two decimal places.) Multiple Choice O 2.85 years. 2.57 years.Franklin Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Franklin would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: \table[[Year,Nature of Item,Cash Inflow,Cash Outflow],[Year 1,Purchase price,,$86,800The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for five years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income fromOperations Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The average rate of return for this investment is
- The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income fromOperations Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The net present value for this investment is: The answer is $19,875. How did they get this number?The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Operating Income Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The net present value for this investment is a. $19,875 b. $118,145 c. $(19,875) d. $(118,145)A fully automatic chucker and bar machineis to be purchased for $45,000. The money will beborrowed with the stipulation that it be repaid withsix equal end-of-year payments at 12% compoundedannually. The machine is expected to provide annualrevenue of $13,000 for six years and is to be depreciated by the MACRS seven-year recovery period. Thesalvage value at the end of six years is expected tobe $4,000. Assume a marginal tax rate of 35% and aMARR of 15%.(a) Determine the after-tax cash flow for this assetover six years.(b) Determine whether the project is acceptable onthe basis of the IRR criterion.
- The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year OperatingIncome Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The net present value for this investment is a. $118,145 b. $19,875 c. $(118,145) d. $(19,875) Please avoid solution image based thnxThe management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year OperatingIncome Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The average rate of return for this investment is a.10% b.15% c.5% d.25%A piece of equipment in the 5-year MACRS asset class is being considered that makes pinballs The equipment changes cash flows as follows Revenues $5/pinball $1/pinball Fixed cost: $1000 per year COGS The equipment is expected to last seven years, at which point it will have zero value Bank interest rates are 5% annual interest, and overall tax rate is 21%SEE MORE QUESTIONS