The ABC company is thinking of purchasing a new luxury coach to sustain its prestige client business. The purchase cost of the vehicle, including license plates and delivery, is $120,000. The company anticipates that it will use the vehicle for five years and be able to sell it at the end of that period for $40,000. The revenue the company expects to generate using the coach is as follows: By the end of year net profit before depreciation ($)1234530,00030,00030,00025,00020,000What is the accounting rate of return for this investment?Workout the payback period for the investment proposed being considered by ABC company. The following indices monitor the annual profits of J.A company.year12345678Index 1Index 2100138162196220100 125 140 165 What are the base years for the indices?If the company had not changed to index 2, what values would index 1 have in year 6 to 8?What values does index 2 have in year1 to 4?If the company made a profit of $4.86 million in year 1, how much did it make in the other years?If you invest SR2000 how much will you have after three years if the interest rate is 12% a year? Rockwall trust is thinking of investing in a new technology company. There are two possible investments, whose profits can be summarized as follows: option 1 gives a profit of $300,000 in five years’ time. Option 2 gives a profit of $500,000 in 10 years’ time. Which option should the company choose if it uses a discount rate of 20% a year for future profits? What is the net present value of the proposed investment in the luxury coach by the ABC company in question 1 of this assignment? Use a 10% interest rate.

NOTE: As per our policy, we only solve one question when many are posted. Hence, the first…

Answered: The ABC company is thinking of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 12P

See similar textbooks

Related questions

Concept explainers

Question

The ABC company is thinking of purchasing a new luxury coach to sustain its prestige client business. The purchase cost of the vehicle, including license plates and delivery, is $120,000. The company anticipates that it will use the vehicle for five years and be able to sell it at the end of that period for $40,000. The revenue the company expects to generate using the coach is as follows:

By the end of year

net profit before depreciation ($)

30,000

25,000

20,000

What is the accounting rate of return for this investment?
Workout the payback period for the investment proposed being considered by ABC company.

The following indices monitor the annual profits of J.A company.

year

Index 1

Index 2

100

138

162

196

220

100

125

140

165

What are the base years for the indices?
If the company had not changed to index 2, what values would index 1 have in year 6 to 8?
What values does index 2 have in year1 to 4?
If the company made a profit of $4.86 million in year 1, how much did it make in the other years?
If you invest SR2000 how much will you have after three years if the interest rate is 12% a year?

Rockwall trust is thinking of investing in a new technology company. There are two possible investments, whose profits can be summarized as follows: option 1 gives a profit of $300,000 in five years’ time. Option 2 gives a profit of $500,000 in 10 years’ time. Which option should the company choose if it uses a discount rate of 20% a year for future profits?

What is the net present value of the proposed investment in the luxury coach by the ABC company in question 1 of this assignment? Use a 10% interest rate.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions