FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Payback, Accounting Rate of Return, Net Present valde, Internal Rate of Retum
Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below.
Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay
required is $460,800. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow:
Year
1
2
3
4
5
Required:
Cash Revenues
$612,000
612,000
612,000
612,000
612,000
Cash Expenses
$432,000
432,000
432,000
432,000
432,000
1. Compute the payback period for the NC equipment. Round your answer to two decimal places.
2.56 ✓ years
Check My Work
2. Compute the NC equipment's ARR. Round the percentage to one decimal place. Assume straight-line depreciation.
19.1 ✓ %
3. Compute the investment's NPV, assuming required rate of return of 10%. Round present value calculations and your final answer to the nearest dollar.
$221,541 X
Previous
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Transcribed Image Text:Payback, Accounting Rate of Return, Net Present valde, Internal Rate of Retum Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below. Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $460,800. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year 1 2 3 4 5 Required: Cash Revenues $612,000 612,000 612,000 612,000 612,000 Cash Expenses $432,000 432,000 432,000 432,000 432,000 1. Compute the payback period for the NC equipment. Round your answer to two decimal places. 2.56 ✓ years Check My Work 2. Compute the NC equipment's ARR. Round the percentage to one decimal place. Assume straight-line depreciation. 19.1 ✓ % 3. Compute the investment's NPV, assuming required rate of return of 10%. Round present value calculations and your final answer to the nearest dollar. $221,541 X Previous
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