The Molding Department of General Santos, Inc. doing an investigation for the possibility of acquiring a new unit of equipment at the amount of $120,000. Cash cost savings before income tax from the use of this equipment has been estimated at $50,000 a year for a period of 4 years. At the end of 4 years, the equipment will have no salvage value. The minimum acceptable rate is 12% discounted rate. Requirements: Calculate the NPV under straight-line depreciation Calculate the NPV under SYD depreciation. Explain how bookkeeping method can help to improve the rating of a capital investment project.
The Molding Department of General Santos, Inc. doing an investigation for the possibility of acquiring a new unit of equipment at the amount of $120,000. Cash cost savings before income tax from the use of this equipment has been estimated at $50,000 a year for a period of 4 years. At the end of 4 years, the equipment will have no salvage value. The minimum acceptable rate is 12% discounted rate. Requirements: Calculate the NPV under straight-line depreciation Calculate the NPV under SYD depreciation. Explain how bookkeeping method can help to improve the rating of a capital investment project.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Molding Department of General Santos, Inc. doing an investigation for the possibility of acquiring a new unit of equipment at the amount of $120,000. Cash cost savings before income tax from the use of this equipment has been estimated at $50,000 a year for a period of 4 years. At the end of 4 years, the equipment will have no salvage value. The minimum acceptable rate is 12% discounted rate.
Requirements:
- Calculate the NPV under straight-line
depreciation - Calculate the NPV under SYD depreciation.
- Explain how bookkeeping method can help to improve the rating of a capital investment project.
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