ime Value of Money and CVP Analysis Assignment i Quary Company is considering an investment in machinery with the following information. The company's required rate of return 14%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Initial investment Useful life Salvage value Expected sales per year $ 258,000 Required A Required B 9 years $ 25,800 12,000 units Years 1-9 Year 9 salvage Totals Complete this question by entering your answers in the tabs below. a. Compute the investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 14%? Hint: It is not necessary to compute the IRR to answer this question. Materials, labor, and overhead (except depreciation) Depreciation Machinery Compute the investment's net present value. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar. Net Cash Flows Selling, general, and administrative expenses Selling price per unit X + Present Value Required A Present Value of Net Cash Flows $ $ Saved 0 70,000 Required B > $ 49,000 25,800 9,000 $12

ime Value of Money and CVP Analysis Assignment i Quary Company is considering an investment in machinery with the following information. The company's required rate of return 14%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Initial investment Useful life Salvage value Expected sales per year $ 258,000 Required A Required B 9 years $ 25,800 12,000 units Years 1-9 Year 9 salvage Totals Complete this question by entering your answers in the tabs below. a. Compute the investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 14%? Hint: It is not necessary to compute the IRR to answer this question. Materials, labor, and overhead (except depreciation) Depreciation Machinery Compute the investment's net present value. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar. Net Cash Flows Selling, general, and administrative expenses Selling price per unit X + Present Value Required A Present Value of Net Cash Flows $ $ Saved 0 70,000 Required B > $ 49,000 25,800 9,000 $12

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2PB

See similar textbooks

Similar questions

Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $34,200 $105,000 $72,000 $168,000 2 34,200 105,000 55,000 142,000 3 34,200 105,000 27,000 100,000 4 34,200 105,000 12,000 68,000 5 34,200 105,000 5,000 47,000 Total $171,000 $525,000 $171,000 $525,000 Each project requires an investment of $360,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621…
Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $47,500 $152,000 $100,000 $243,000 2 47,500 152,000 76,000 205,000 3 47,500 152,000 38,000 144,000 4 47,500 152,000 17,000 99,000 5 47,500 152,000 6,500 69,000 Total $237,500 $760,000 $237,500 $760,000 Each project requires an investment of $500,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747…
Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic Assembler Operating Income Robotic Assembler Net Cash Flow Warehouse Operating Income Warehouse Net Cash Flow 1 $52,800 $172,000 $111,000 $275,000 2 52,800 172,000 84,000 232,000 3 52,800 172,000 42,000 163,000 4 52,800 172,000 18,000 112,000 5 52,800 172,000 9,000 78,000 Total $264,000 $860,000 $264,000 $860,000 Each project requires an investment of $480,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6%. Required: Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest…
Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Robotic Assembler Robotic Assembler Warehouse Operating Warehouse Year Operating Income Net Cash Flow Income Net Cash Flow 1 $60,000 $186,000 $126,000 $298,000 2 60,000 186,000 96,000 251,000 3 60,000 186,000 48,000 177,000 4 60,000 186,000 21,000 121,000 5 60,000 186,000 9,000 83,000 Total $300,000 $930,000 $300,000 $930,000 Each project requires an investment of $600,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572…
Find the profitability index for Oman Air conditioner Company if the initial investment is 4000 OMR and the cash Inflows are as follows: Year 1 =1350 OMR; Year 2 =1400 OMR; Year 3=1450 OMR and Year 4=1500 OMR. Use discount rate as 5%. Select one: a. None b. 1.69 c. 1.83 d. 1.26 e. 1.48
Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Wind Turbines Biofuel Equipment 1 $280,000 $300,000 2 280,000 300,000 3 280,000 300,000 4 280,000 300,000 The wind turbines require an investment of $887,600, while the biofuel equipment requires an investment of $911,100. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868…
Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Wind Turbines Biofuel Equipment 1 $280,000 $300,000 2 280,000 300,000 3 280,000 300,000 4 280,000 300,000 The wind turbines require an investment of $887,600, while the biofuel equipment requires an investment of $911,100. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868…
The business units of contractor companies carry out investment expenditures for a capital of 80,015,000 the investment is expected to be generate a cash flow of 6,015,000 per year for 8 years, costs capital (cost of money) of 5% per year and an assumed interest rate of 10%. Pelase Count : a. Payback Period of Investment b. NPV c. Profitability Index d. IRR
Net present value method, internal rate of return method, and analysis for a service company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Wind Turbines Biofuel Equipment 1 $400,000 $840,000 2 400,000 840,000 3 400,000 840,000 4 400,000 840,000 The wind turbines require an investment of $1,035,600, while the biofuel equipment requires an investment of $2,398,200. No residual value is expected from either project. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Required: 1a. Compute the net present value for each project. Use a rate of…
Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Wind Turbines Biofuel Equipment 1 $410,000 $860,000 2 410,000 860,000 3 410,000 860,000 4 410,000 860,000 The wind turbines require an investment of $1,061,490, while the biofuel equipment requires an investment of $2,455,300. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192…
A company is considering a $184,000 investment in machinery with the following net cash flows. The company requires a 10% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net Cash Flow (a) Compute the net present value of this investment. (b) Should the machinery be purchased? Required A Required B Year 1 $11,000 Year Year 2 $31,000 Complete this question by entering your answers in the tabs below. Year 1 Year 2 Year 3 Net Cash Flows Year 3 $61,000 Compute the net present value of this investment. (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) Present Value Factor Year 4 $46,000 Present Value of Net Cash Flows Year 5 $123,000
Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Year OperatingIncome Net CashFlow OperatingIncome Net CashFlow 1 $55,000 $177,000 $116,000 $283,000 2 55,000 177,000 88,000 239,000 3 55,000 177,000 44,000 168,000 4 55,000 177,000 19,000 115,000 5 55,000 177,000 8,000 80,000 Total $275,000 $885,000 $275,000 $885,000 Each project requires an investment of $500,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826…