Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 16, Problem 4ATC
Webb Publishing Company is evaluating two investment opportunities. One is to purchase an Internet company with the capacity to open new
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Write a response discussing the usefulness of capital investment techniques (
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Problem A-21 (Algo) Sensitivity Analysis in Capital Investment Decisions
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QUESTION 1
Agro Tech Corporation is considering investing in a new IT system for selling to its clients. The company has
identified two new possible systems, which would be suitable for its customers. Only one of the systems can be
selected and the directors are looking for guidance on which system would be the best. The company requires a
15% rate of return on projects of this nature.
The installation cost per project will be R100 000 each, while systems can be disposed for R200 000 each after
five- years life span.
Cash flows for Agro Tech Corporation: IT System (Rands)
PERIOD
1
2
3
4
5
SYSTEM A -4 000 000
R1 800 000 R1 700 000 R1 600 000 R1 500 000 R1 400 000
SYSTEM B -3 500 000
1 500 000 1 500 000
1 500 000
1 400 000 R1 300 000
Required:
1.1 Determine the payback period in years, months and days for both systems
1.2 Based on your calculations in 1.1, which system should Agro Tech Corporation consider? Why?
1.3 Calculate the Net Present Value for both systems.
1.4 Calculate the…
None
Chapter 16 Solutions
Survey Of Accounting
Ch. 16 - Prob. 1QCh. 16 - Prob. 2QCh. 16 - Prob. 3QCh. 16 - 4. Define the term return on investment. How is...Ch. 16 - Prob. 5QCh. 16 - Prob. 6QCh. 16 - Prob. 7QCh. 16 - Prob. 8QCh. 16 - Prob. 9QCh. 16 - Prob. 10Q
Ch. 16 - 11. Maria Espinosa borrowed 15,000 from the bank...Ch. 16 - Prob. 12QCh. 16 - 13. What criteria determine whether a project is...Ch. 16 - Prob. 14QCh. 16 - Prob. 15QCh. 16 - Prob. 16QCh. 16 - 17. What is the relationship between desired rate...Ch. 16 - Prob. 18QCh. 16 - Prob. 19QCh. 16 - Prob. 20QCh. 16 - Prob. 21QCh. 16 - Prob. 22QCh. 16 - Prob. 23QCh. 16 - Exercise 10-1A Identifying cash inflows and...Ch. 16 - Exercise 10-2A Determining the present value of a...Ch. 16 - Prob. 3ECh. 16 - Prob. 4ECh. 16 - Exercise 10-5A Determining net present value...Ch. 16 - Exercise 10-6A Determining net present value Aaron...Ch. 16 - Exercise 10-7A Using the present value index Rolla...Ch. 16 - Exercise 10-8A Determining the cash flow annuity...Ch. 16 - Prob. 9ECh. 16 - Exercise 10-10A Using the internal rate of return...Ch. 16 - Prob. 11ECh. 16 - Prob. 12ECh. 16 - Exercise 10-13A Determining the payback period...Ch. 16 - Prob. 14ECh. 16 - Prob. 15ECh. 16 - Prob. 16PCh. 16 - Prob. 17PCh. 16 - Problem 10-18A Postaudit evaluation Brett Collins...Ch. 16 - Problem 10-19A Using net present value and...Ch. 16 - Problem 10-20A Using the payback period and...Ch. 16 - Problem 10-21A Using net present value and payback...Ch. 16 - Problem 10-22A Effects of straight-line versus...Ch. 16 - Problem 10-23A Comparing internal rate of return...Ch. 16 - Prob. 1ATCCh. 16 - ATC 10-4 Writing Assignment Limitations of capital...Ch. 16 - Prob. 5ATC
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