Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 16, Problem 39E
The state’s Secretary of Education is considering the purchase of a new computer for $100,000. A cost study indicates that the new computer should save the Department of Education $30,000, measured in real dollars, during each of the next eight years.
The real interest rate is 20 percent and the inflation rate is 10 percent. As a governmental agency, the Department of Education pays no taxes.
Required:
- 1. Compute the nominal interest rate.
- 2. Prepare a schedule of
cash flows measured in nominal dollars. - 3. Using cash flows measured in nominal dollars, compute the
net present value of the proposed computer. Use a nominal discount rate equal to the nominal interest rate.
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a. Use Present Value Appendix PV of $1, to determine the maximum amount of cash the dean
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The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The
machine would add to student convenience, but the dean feels compelled to earn an 10 percent return on the investment of funds.
Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine
would probably produce incremental cash inflows of approximately $18,500 per year. The machine is expected to have a three-year
useful life with a zero salvage value.
Note: Use appropriate factor(s) from the tables provided.
Required
a. Use Present Value Appendix PV of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy
machine.
Note: Round your intermediate calculations and final answer to 2 decimal places.
b. Use Present Value Appendix PVA of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy
machine.
Note: Round your final…
The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The
machine would add to student convenience, but the dean feels compelled to earn an 10 percent return on the investment of funds.
Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine
would probably produce incremental cash inflows of approximately $19,000 per year. The machine is expected to have a three-year
useful life with a zero salvage value. (Use appropriate factor(s) from the tables provided.)
Required
a. Use Present Value Appendix PV of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy
machine. (Round your intermediate calculations and final answer to 2 decimal places.)
b. Use Present Value Appendix PVA of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy
machine. (Round your final answer to 2…
Chapter 16 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Explain the following terms: recovery of...Ch. 16 - List and briefly explain two advantages that the...Ch. 16 - List and briefly explain four assumptions...Ch. 16 - Prob. 9RQCh. 16 - Prob. 10RQ
Ch. 16 - Give an example of a noncash expense. What impact...Ch. 16 - Prob. 12RQCh. 16 - What is a depreciation tax shield? Explain the...Ch. 16 - Prob. 14RQCh. 16 - Why is accelerated depreciation advantageous to a...Ch. 16 - Prob. 16RQCh. 16 - Why may the net-present-value and...Ch. 16 - Prob. 18RQCh. 16 - What is meant by the term payback period? How is...Ch. 16 - Prob. 20RQCh. 16 - How is an investment projects accounting rate of...Ch. 16 - Prob. 22RQCh. 16 - Prob. 23RQCh. 16 - Prob. 24ECh. 16 - Refer to the data given in the preceding exercise....Ch. 16 - Prob. 26ECh. 16 - Prob. 28ECh. 16 - Prob. 29ECh. 16 - Prob. 30ECh. 16 - Prob. 31ECh. 16 - Prob. 32ECh. 16 - Sharpe Machining Company purchased industrial...Ch. 16 - The owner of Atlantic City Confectionary is...Ch. 16 - The management of Niagra National Bank is...Ch. 16 - Allegience Insurance Companys management is...Ch. 16 - Prob. 37ECh. 16 - Prob. 38ECh. 16 - The states Secretary of Education is considering...Ch. 16 - The supervisor of the county Department of...Ch. 16 - Prob. 41PCh. 16 - Prob. 42PCh. 16 - Prob. 43PCh. 16 - Special People Industries (SPI) is a nonprofit...Ch. 16 - Washington Countys Board of Representatives is...Ch. 16 - Prob. 46PCh. 16 - Prob. 47PCh. 16 - Mind Challenge, Inc. publishes innovative science...Ch. 16 - Philadelphia Fastener Corporation manufactures...Ch. 16 - Prob. 50PCh. 16 - Prob. 51PCh. 16 - Prob. 52PCh. 16 - Prob. 53PCh. 16 - Prob. 54PCh. 16 - Prob. 55PCh. 16 - Prob. 56PCh. 16 - Pensacola Cablevision Company provides television...Ch. 16 - Pensacola Cablevision Company provides television...Ch. 16 - The board of education for the Central Catskill...Ch. 16 - Prob. 60C
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