The following data applies to the next 3 questions.A machine costs $16,000 and is expected to produce profit before depreciation of $5,000 in each of years 1 and 2, and $6,000 in each ofyears 3 and 4. Assume that the machine is depreciated at a constant rate of $4,000 a year and that there are no taxes.How much are the average accounting earnings?$1,000B $1,250C) $1,500$1,750E) $2,000

Average Accounting earning is that earning which is earned by the investor during the period of…

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 2P

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A company is planning to spend P60,000 for a machine which will be depreciated on a straight-line basis over 10 year period. the machine will generate additional cash revenues of P12,000 a year. It will incur additional costs except for depreciation. the income tax rate is 35%. Determine the accounting rate of return.
What is the per-year depreciation amount if straight-line depreciation is used? Suppose a business purchases a machine for $10,000. The useful life is estimated to be 5 years, and the income tax rate is 25%. In the first year, the company makes $5,000 worth of sales using the machine, and operational expenses were $1,500.
A machine has a first cost of $10,000 and an expected salvage value of $900 when it is sold. Annually, the operating cost is $500, and the revenue generated from sales is $2,500. What is the payback period assuming a MARR of 20% per year, an effective tax rate of 15%, and straight line depreciation over 5 years taking into account the salvage value (note, even though the machine might be fully depreciated down to its salvage value for tax purposes, assume the machine can continue to operate forever and that it will never be sold).
A company buys a machine for $80,000 that has an expected life of 10 years and no salvage value. The company uses straight-line depreciation. The company anticipates a yearly net income of $3,850 after taxes of 14%, with the cash flows to be received evenly throughout each year. What is the accounting rate of return? a) 4.81% b) 8.28% c) 1.35% d) 9.63% e) 48.13%
Suppose a new car is purchased for $45,357 and depreciates by 21% over the first year of ownership. If the car is driven 12,870 miles in that year, what is the cost, in dollars per 100 miles driven, for depreciation? (Enter a number. Round your answer to the nearest cent.)
A machine generates $500,000 of gross income during its tax year and incurs operating expenses of $25,000. aditional expences on business assets amount $20,000 and insurances amount $75,000. The total depreciation deductions equal $80,000. if the tax rate is 10 percent from the total texable income of this machine, find the pesent worth of this machine if it is basic cost is 500,000 ? use i=5%.N=10 years. O a. $1,584,859 O b. $2,202,585 Oc. $2,202,356 O d. $2,202,595 O e. $2,202,754
A machine can be purchased for $150,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied using a five-year life and a zero salvage value. Compute the machine’s payback period (ignore taxes). (Round the payback period to three decimals.) Year 1 Year 2 Year 3 Year 4 Year 5 Net income . $10,000 $25,000 $50,000 $37,500 $100,000
Suppose a new car is purchased for $45,357 and depreciates by 21% over the first year of ownership. If the car is driven 12,470 miles in that year, what is the cost, in dollars per 100 miles driven, for depreciation? (Enter a number. Round your answer to the nearest cent.) dollars per 100 miles)
Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Express your answer as a percentage, rounded to two decimal places.
A machine can be purchased for $150,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied using a five-year life and a zero salvage value. Compute the machine’s payback period (ignore taxes). (Round the payback period to three decimals.)
A company buys a machine for $180,000 that has an expected life of nine years and no salvage value. The company expects an annual net income (after taxes of 30%) of $8,550. What is the accounting rate of return?
A machine having a first cost of P 60,000.00 will be retired at the end of 8 years. Depreciation cost is computed using a constant percentage of the declining book value. What is the total cost of depreciation in pesos, up to the time the machine is retired if the annual rate of depreciation is 28.72%?

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