Ashvini Kenneth Googal owns a garage and is contemplating purchasing a tire retreading machine for $18,000. After estimating costs andrevenues, Kenneth projects a net cash inflow from the retreading machine of $3,960 annually for 7 years. Kenneth hopes to earn areturn of 9% on such investments. What is the present value of the retreading operation? Should Kenneth Googal purchase theretreading machine? (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (Round answer to 2 decimalplaces, e.g. 15.25.)Click here to view the factor table..(a) The present value of the retreading operation is(b) Kenneth Googalpurchase the retreading machine.

Present value of retreading operation is present value of annual cash inflows.If present value of…

Answered: Kenneth Googal owns a garage and is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Manny Kurr is considering the purchase of a beauty salon. The initial costof this purchase is $16,000. The after-tax cash flows from this investmentshould be $4,000 per year for the next 5 years. His opportunity cost of capitalis 10 percent. Calculate the following:a. Payback—Should Manny buy the beauty salon based on payback if hisrequired payback is less than 3 years?b. The present value of the benefits (PVB),c. The present value of the costs (PVC),d. The net present value (NPV )—Should Manny buy the beauty salon basedon NPV rules?e. Profitability index (PI )—what does the profitability index mean in terms ofbuying the beauty salon?f. Internal rate of return (IRR), (Hint: Use interpolation)—should Manny buythe beauty salon based on IRR rules?g. Accounting rate of return (ARR)—Should Manny buy the beauty salonbased on the ARR?
Cromwell is acquiring some land for $1,200,000 in exchange for semiannual payments of $75,000 at an interest rate of 6.35 percent. How many years will it take Cromwell to pay for this purchase? Is there a calculator solution for this?
Joe's Taco Hut can purchase a delivery truck for $20,000, for which he will take out a loan from the bank. He estimates it will generate a net income (after taxes, maintenance, and operating costs) of $4,000 per year. His other option is to go to work for someone else earning net income of $3,000 per year. Assume that Joe can resell the truck for the entire purchase price of $20,000. What is the VMP for the delivery truck (Joe's MB if he buys it)? Please enter your answer as a numerical response and do not type out your answer as words (ie. $3000 not "Three thousand dollars"). Will Joe buy the delivery truck if the interest rate is 3%? Simply type either "Yes" or "No" into the answer box Will Joe buy the delivery truck if the interest rate is 7%? Simply type either "Yes" or "No" into the answer box What is the highest interest rate Joe would be willing to pay? Please enter your answer as a numerical response and do not type your answer as words (ie. 3% not Three percent").
Cromwell is acquiring some land for $1,200,000 in exchange for semiannual payments of $75,000 at an interest rate of 6.35 percent. How many years will it take Cromwell to pay for this purchase? Can the excel solution be provided?
Bill plans to open a do-it-yourself dog bathing center in a storefront. The bathing equipment will cost $160, 000. Bill expects the after-tax cash inflows to be $ 40,000 annually for seven years, after which he plans to scrap the equipment and retire to the beaches of Jamaica. Assume the required return is 10% . What is the project's discounted payback period (nearest year)?
Mr. chan wants to purchase a house after a couple of years. his target house value is P4,975,193. He decides to invest in a product where he can deposit yearly P592796 starting at the beginning of each year until year 13. he wants to know what is the present value of the annuity investment that he is doing. this would enable him to know what the true cost of the property in today's term is. you are required to do the calculation of the present value of the annuity due that mr. chan is planning to make. assume that the rate earned on investment will be 9.87%. Write your answer in two decimal places
In a book named Treasure, the reader has to figure out where a 2.2 pound, 24 kt gold horse has been buried. If the horse is found, a prize of $25,000 a year for 20 years is provided. The actual cost to the publisher to purchase an annuity to pay for the prize is $245,000. What interest rate (to the nearest percent) was used to determine the amount of the annuity? (Assume end-of-year payments.)
Simon is considering purchasing an emu, which he can graze for free in his backyard. Once the emu reaches maturity (in exactly three years), Simon will be able to sell it for $2,000. The emu costs $1,500. a. Suppose that interest rates are 8%. Calculate the net present value of the emu investment. Does the NPV indicate that Simon should buy the emu? b. Suppose that Simon passes on the emu deal, and invests $1,500o in his next-best opportunity: a safe government bond yielding 8%. Is this outcome better or worse than buying the emu? Please explain.
Susan Orman wants to pay $1,400 semiannually to her granddaughter for 10 years for helping her around the house. If Susan can invest money at 6% compounded quarterly, how much must she invest today to meet this goal? (Please use the following provided Table.) (Do not round intermediate calculations. Round your answer to the nearest cent.)
Barbara Jones made an investment of $7,606.08. From this investment, she will receive $1,000 annually for the next 15 years starting one year from now. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What rate of interest will Barbara's investment be earning for her? (Hint: Use Table 4.) (Round answer to 0 decimal places, e.g. 25%) Rate of interest %
Loni buys a machine for her business. The machine costs $280,000. Loni estimates that the machine can produce a $64,000 cash inflow per year for the next 9 years. Loni's cost of capital is 7 percent. What is the approximate present value of the cash flow benefits for Loni?
George has planned ahead and identified his dream house purchase in 3 years’ time. The current value of the house is $580 000. It is expected that the house will increase in value at a rate of 4.5% p.a. 4) How much does he need to borrow from the bank at the end of year 3 to buy the house? (Assume George will borrow 90% from the bank)

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