Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 16, Problem 8E
Exercise 10-8A Determining the
To open a new store, Enid Tire Company plans to invest $320,000 in equipment expected to have a four-year useful life and no salvage value. Enid expects the new store to generate annual cash revenues of $400,000 and to incur annual cash operating expenses of $240,000. Enid’s average income tax rate is 30 percent. The company uses straight-line depreciation.
Required
Determine the expected annual net
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Problem 12-8 After-Tax Cash Flow from Sale of Assets (LG12-4)
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rate of 35 percent and a discount rate of 13 percent.
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Answer is complete but not entirely correct.
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Cash payback period, net present value analysis, and qualitative considerations
The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly
equipment. The new equipment will cost $201,000. The manager believes that the new investment will result in
direct labor savings of $67,000 per year for 10 years.
Present Value of an Annuity of $1 at Compound Interest
Year
10%
12%
15%
20%
1
0.943 0.909 0.893 0.870
1.833
1.736.
1.690
1.626
2.673
2.487
3.465
3.170 3.037
3.791
3.605 3.353
4.917
4.355
4.111
3.785
5.582
4.868 4.564
4.160
6.210
5.335
4.968
4.487
6.802
5.759
5.328
4.772
7.360 6.145 5.650 5.019
a. What is the payback period on this project?
X years
2
3
4
5
6
7
8
9
6%
10
4.212
2.402
2.283
2.855
0.833
1.528
2.106
2.589
2.991
3.326
3.605
3.837
4.031
4.192
b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the
nearest whole dollar.
Net present value
c. What else should the manager consider in the…
Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations
The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $245,000. The manager believes that the new investment will result in direct labor savings of $49,000 per year for 10 years.
Present Value of an Annuity of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589
5
4.212
3.791
3.605
3.353
2.991
6
4.917
4.355
4.111
3.785
3.326
7
5.582
4.868
4.564
4.160
3.605
8
6.210
5.335
4.968
4.487
3.837
9
6.802
5.759
5.328
4.772
4.031
10
7.360
6.145
5.650
5.019
4.192
a. What is the payback period on this project?fill in the blank years
b. What is the net present value, assuming a 12% rate of return? Use the table provided above. Round to the nearest whole dollar.
Net present value…
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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