ACCOUNTING F/GOVT+NONPROFIT CONNECT+>I
17th Edition
ISBN: 9781308820217
Author: RECK
Publisher: Mcgraw-Hill/Create
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Chapter 7, Problem 16.9EP
To determine
Identify the correct answer by solving the amount of net investment in capital assets.
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Students have asked these similar questions
First United Bank Inc. is evaluating three capital investment projects using the net present value method. Relevant data related to the projects are summarized as follows:
BranchOfficeExpansion
ComputerSystemUpgrade
ATMKioskExpansion
Amount to be invested
$686,053
$516,654
$295,458
Annual net cash flows:
Year 1
411,000
288,000
177,000
Year 2
382,000
259,000
122,000
Year 3
349,000
230,000
89,000
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5
0.747
0.621
0.567
0.497
0.402
6
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279
8
0.627
0.467
0.404
0.327
0.233
9
0.592
0.424
0.361
0.284
0.194
10
0.558
0.386
0.322
0.247
0.162
Required:
1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each project. Use the…
The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:
Front-End Loader
Greenhouse
Year
Income fromOperations
Net CashFlow
Income fromOperations
Net CashFlow
1
$46,800
$144,000
$98,000
$230,000
2
46,800
144,000
75,000
194,000
3
46,800
144,000
37,000
137,000
4
46,800
144,000
16,000
94,000
5
46,800
144,000
8,000
65,000
Total
$234,000
$720,000
$234,000
$720,000
Each project requires an investment of $520,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis.
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636…
The internal rate of return method is used by Royston Construction Co. in analyzing a capital expenditure proposal that involves an investment of $58,416 and annual net cash flows of $12,000 for each of the 7 years of its useful life.
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. Determine a present value factor for an annuity of $1, which can be used in determining the internal rate of return. If required, round your answer to three decimal places.fill in the blank 1 of 1
b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the proposal.fill in the blank 1 of 1 %…
Chapter 7 Solutions
ACCOUNTING F/GOVT+NONPROFIT CONNECT+>I
Ch. 7 - Prob. 1QCh. 7 - Explain the reporting requirements for internal...Ch. 7 - A member of the city commission insists that the...Ch. 7 - Prob. 4QCh. 7 - What is the purpose of the Restricted Assets...Ch. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - When do GASB standards require interfund...Ch. 7 - Prob. 9QCh. 7 - What is meant by segment information for...
Ch. 7 - Prob. 11CCh. 7 - Prob. 12CCh. 7 - Enterprise Fund Golf Course Management. (LO7-1)...Ch. 7 - Prob. 16.1EPCh. 7 - Which of the following would most likely be...Ch. 7 - Under GASB standards, the City of Parkview is...Ch. 7 - Prob. 16.4EPCh. 7 - Which of the following events would generally be...Ch. 7 - Prob. 16.6EPCh. 7 - Prob. 16.7EPCh. 7 - Prob. 16.8EPCh. 7 - Prob. 16.9EPCh. 7 - Prob. 16.10EPCh. 7 - Prob. 17EPCh. 7 - Prob. 18EPCh. 7 - Prob. 19EPCh. 7 - Prob. 20EPCh. 7 - Prob. 21EPCh. 7 - Prob. 22EPCh. 7 - Prob. 23EPCh. 7 - Prob. 24EP
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