Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Chapter 12, Problem 12.17AE
To determine
The payback period of project M.
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Assuming that you would like to buy an equipment for your small business. Using the information below, calculate the Rate of Return and the Pay Back Period for the investment. After presenting your calculations, explain why you think this will (or will not) be a good investment.
Here are the numbers:
Cost of the investment is $100,000
Estimated depreciable life of investment is 5 years
Annual depreciated charge is $15,000
Estimated average profit over depreciable life is $10,000.
Learning Activity 1. Capital Budgeting Techniques
Problem 1. Magtibay, Inc. is planning to acquire a new machine at a total cost of Php 360,000. The estimated life of the machine is six years with no salvage value. The straight-line method of depreciation will be used. Magtibay estimates that the annual cash flow from operations, before income taxes, from using the machine amounts to Php 90,000. Assume that Magtibay’s cost of capital is 8% and the income tax rate is 40%. The present vale of P1 at 8% for 6 years is 0.630. The present value of an annuity of P1 in arrears at 8% for 6 years is 4.623.
Questions:
What would be the payback period for the machine?
What would be the net present value?
MAIN PROJECT
Szabist University is considering investing in an online book ordering and information service, which will be managed by 2 employees. The following estimates relate to the costs of starting the service and the subsequent revenues from it.
The initial investment needed to start the service, including the installation of additional phone lines and computer equipment, will be $1,000,000. These investments are expected to have a life of 4 years with 0 salvage value.The investments will be depreciated straight line over the four-year life.The revenues in the first year are expected to be $1500,000, growing 20% in year 2, and 10% in the two years following.The salaries and other benefits for the employees are estimated to be $150,000 in year 1, and grow 10% a year for the following three years.The cost of the books is assumed to be “0.60” of the revenues in each of the four years.The non-cash working capital, which includes the inventory of books needed for the service and the…
Chapter 12 Solutions
Managerial Accounting (5th Edition)
Ch. 12 - Prob. 1QCCh. 12 - (Learning Objective 2) After identifying potential...Ch. 12 - Prob. 3QCCh. 12 - Prob. 4QCCh. 12 - Prob. 5QCCh. 12 - Prob. 6QCCh. 12 - Prob. 7QCCh. 12 - Prob. 8QCCh. 12 - Prob. 9QCCh. 12 - (Learning Objective 5) Which of the following...
Ch. 12 - Order the capital budgeting process (Learning...Ch. 12 - Prob. 12.2SECh. 12 - Prob. 12.3SECh. 12 - Prob. 12.4SECh. 12 - Prob. 12.5SECh. 12 - Prob. 12.6SECh. 12 - Prob. 12.7SECh. 12 - Prob. 12.8SECh. 12 - Prob. 12.9SECh. 12 - Prob. 12.10SECh. 12 - Prob. 12.11SECh. 12 - Prob. 12.12SECh. 12 - Prob. 12.13SECh. 12 - Prob. 12.14SECh. 12 - Prob. 12.15SECh. 12 - Identify ethical standards violated (Learning...Ch. 12 - Prob. 12.17AECh. 12 - Compute payback period and analyze changes...Ch. 12 - Prob. 12.19AECh. 12 - Prob. 12.20AECh. 12 - Prob. 12.21AECh. 12 - Prob. 12.22AECh. 12 - Calculate the payback and NPV for a sustainable...Ch. 12 - Prob. 12.24AECh. 12 - Prob. 12.25AECh. 12 - Prob. 12.26AECh. 12 - Prob. 12.27AECh. 12 - Prob. 12.28AECh. 12 - Prob. 12.29AECh. 12 - Prob. 12.30AECh. 12 - Prob. 12.31AECh. 12 - Prob. 12.32AECh. 12 - Prob. 12.33AECh. 12 - Prob. 12.34AECh. 12 - Prob. 12.35AECh. 12 - Prob. 12.36BECh. 12 - Prob. 12.37BECh. 12 - Prob. 12.38BECh. 12 - Prob. 12.39BECh. 12 - Prob. 12.40BECh. 12 - Prob. 12.41BECh. 12 - Prob. 12.42BECh. 12 - Prob. 12.43BECh. 12 - Prob. 12.44BECh. 12 - Prob. 12.45BECh. 12 - Prob. 12.46BECh. 12 - Prob. 12.47BECh. 12 - Prob. 12.48BECh. 12 - Prob. 12.49BECh. 12 - Prob. 12.50BECh. 12 - Prob. 12.51BECh. 12 - Prob. 12.52BECh. 12 - Prob. 12.53BECh. 12 - Prob. 12.54BECh. 12 - Prob. 12.55APCh. 12 - Prob. 12.56APCh. 12 - Prob. 12.57APCh. 12 - Prob. 12.58APCh. 12 - Prob. 12.59BPCh. 12 - Prob. 12.60BPCh. 12 - Evaluate an investment using all four methods...Ch. 12 - Prob. 12.62BPCh. 12 - Prob. 12.63SCCh. 12 - Discussion Questions 1. Describe the capital...Ch. 12 - Prob. 12.65ACTCh. 12 - Prob. 12.66ACTCh. 12 - Prob. 12.67ACT
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