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TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $77,000 before income taxes. The machine costs $230,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 40% income tax rate, and has an after-tax hurdle rate of 10%. Year 1 2 3 4 FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity at 10% at 10% 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.000 2.100 3.310 4.641 6.105 7.716 A. Rate of return B. Net present value 10% 0.909 0.826 0.751 0.683 0.621 8.564 Required: A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value. Note: For all requirements, do not round intermediate calculations. Round final answers to whole number. Answer is complete but not entirely correct. 14,899 0.989 1.736 2.487 3.170 3.791 4.355

TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $77,000 before income taxes. The machine costs $230,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 40% income tax rate, and has an after-tax hurdle rate of 10%. Year 1 2 3 4 FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity at 10% at 10% 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.000 2.100 3.310 4.641 6.105 7.716 A. Rate of return B. Net present value 10% 0.909 0.826 0.751 0.683 0.621 8.564 Required: A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value. Note: For all requirements, do not round intermediate calculations. Round final answers to whole number. Answer is complete but not entirely correct. 14,899 0.989 1.736 2.487 3.170 3.791 4.355

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $77,000 before income taxes. The machine costs $230,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 40% income tax rate, and has an after-tax hurdle rate of 10%. Year 1 2 3 4 FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity at 10% at 10% 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.000 2.100 3.310 4.641 6.105 7.716 A. Rate of return B. Net present value 10% 0.909 0.826 0.751 14,899 0.683 0.621 0.564 Answer is complete but not entirely correct. 86 % 0.909 1.736 Required: A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value. Note: For all requirements, do not round intermediate calculations. Round final answers to whole number. 2.487 3.170 3.791 4.355
Transcribed Image Text:TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $77,000 before income taxes. The machine costs $230,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 40% income tax rate, and has an after-tax hurdle rate of 10%. Year 1 2 3 4 FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity at 10% at 10% 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.000 2.100 3.310 4.641 6.105 7.716 A. Rate of return B. Net present value 10% 0.909 0.826 0.751 14,899 0.683 0.621 0.564 Answer is complete but not entirely correct. 86 % 0.909 1.736 Required: A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value. Note: For all requirements, do not round intermediate calculations. Round final answers to whole number. 2.487 3.170 3.791 4.355
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