Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 12, Problem 12.6E
BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The
Instructions
(a) Determine the cash payback period.
(b) Determine the approximate
(c) Assuming the company has a required rate of return of 10%, state your conclusion on whether the new machine should be purchased.
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BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years
ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU
Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The
straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value.
Click here to view the factor table.
(a)
Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.)
Cash payback period
(b)
Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal
places as displayed in the factor table provided.)
Internal rate of return
(c)
years
The investment
Assuming the company has a required rate of return of 10%, determine whether the new machine…
Sandhill Inc. wants to purchase a new machine for $37,840, excluding $1,300 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,100, and Sandhill Inc. expects to sell it for that amount. The new machine will decrease operating costs by $8,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value.Click here to view the factor table.(a)Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.)
Cash payback period
Â
enter the cash payback period in years rounded to 2 decimal places
years
(b)Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Internal rate of return
Â
enter the internal rate of return in…
Sheridan Inc. wants to purchase a new machine for $44,300, excluding $1,500 of installation costs. The old machine was purchased 5
years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,200, and
Sheridan Inc. expects to sell it for that amount. The new machine will decrease operating costs by $10,000 each year of its economic
life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value.
Click here to view the factor table.
(a)
Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.)
Cash payback period
4.36
years
(b)
Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes,
use 5 decimal places as displayed in the factor table provided.)
Internal rate of return
%
(c)
Assuming the company has a required rate of return of 9%, determine whether the new machine should…
Chapter 12 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 12 - Prob. 1QCh. 12 - Prob. 2QCh. 12 - Tom Wells claims the formula for the cash payback...Ch. 12 - Prob. 4QCh. 12 - What is the decision rule under the net present...Ch. 12 - Discuss the factors that determine the appropriate...Ch. 12 - What simplifying assumptions were made in the...Ch. 12 - What are some examples of potential intangible...Ch. 12 - What steps can be taken to incorporate intangible...Ch. 12 - Prob. 10Q
Ch. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - What are the strengths of the annual rate of...Ch. 12 - Prob. 15QCh. 12 - Prob. 16QCh. 12 - Prob. 12.1BECh. 12 - Hsung Company accumulates the following data...Ch. 12 - Thunder Corporation, an amusement park, is...Ch. 12 - Caine Bottling Corporation is considering the...Ch. 12 - McKnight Company is considering two different,...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.1DICh. 12 - Prob. 12.2DICh. 12 - Prob. 12.3DICh. 12 - Prob. 12.4DICh. 12 - Prob. 12.5DICh. 12 - Prob. 12.1ECh. 12 - Doug's Custom Construction Company is considering...Ch. 12 - Prob. 12.3ECh. 12 - BAK Corp. is considering purchasing one of two new...Ch. 12 - Bruno Corporation is involved in the business of...Ch. 12 - BSU Inc. wants to purchase a new machine for...Ch. 12 - Iggy Company is considering three capital...Ch. 12 - Prob. 12.8ECh. 12 - Legend Service Center just purchased an automobile...Ch. 12 - Vilas Company is considering a capital investment...Ch. 12 - Drake Corporation is reviewing an investment...Ch. 12 - U3 Company is considering three long-term capital...Ch. 12 - Prob. 12.2APCh. 12 - Brooks Clinic is considering investing in new...Ch. 12 - Jane's Auto Care is considering the purchase of a...Ch. 12 - Prob. 12.5APCh. 12 - Prob. 12CDCh. 12 - Luang Company is considering the purchase of a new...Ch. 12 - Prob. 12.2BYPCh. 12 - Tecumseh Products Company has its headquarters in...Ch. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.5BYPCh. 12 - Prob. 12.6BYPCh. 12 - Prob. 12.8BYP
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