What is the return on investment? The investment costs $48,900 and has an estimated $12,000 salvage value. Calculate the payback period for the proposed e, You have the following information on a potential investment. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. The company's required rate of return is 11 percent. It is considering investing in a project which costs $350,000 and is expected to generate cash inflows of $140,000 at the end of each year for three years. The machine will cost $1,780,000 and is expected to produce a $195,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and a $33,000 salvage value. Negative amounts should be indicated by #12 You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Assume the company uses straight-line depreciation. QS 11-8 Net present value LO P3Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The product line is estimated to generate cash inflows of $300,000 the first year, $250,000 the second year, and $200,000 each year thereafter for ten more years. Compute the net present value of this investment. Compute this machine s accoun, A machine costs $700,000 and is expected to yield an after-tax net income of $52,000 each year. You w, A machine that cost $720,000 has an estimated residual value of $60,000 and an estimated useful life of eleven years. The present value of an annuity due for five years is 6.109. criteria in order to generate long-term competitive financial returns and . d) 9.50%. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The purpose of this study is to empirically examine the influence of firm characteristics (size, age, industry type, and ownership) on a firm's strategic orientation. Assume the company uses straight-line depreciation (PV of $1. The estimated cash inflow from the project are as follows: Year Cash Inflow Present value factor at 10% 1 70,000 0.909 2 80,000 0.826 3 120,000 0.751 4 90,000 0.683 5 60,000 0.621 Ca, A company is considering investment in a Flexible Manufacturing System. Compute this machine's accounti, On 1/1, a company buys equipment with a cost of $8,100, an estimated salvage value of $1,100, and an estimated useful life of 7 years. Req, A company is contemplating investing in a new piece of manufacturing machinery. What is the depreciation expense for year two using the straight-line method? For example: How much would you need to invest today at 10% compounded semiannually to accumulate $5,000 in 6 years from today? Which of, Fraser Company will need a new warehouse in eight years. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. A machine costs $180,000, has a $12,000 salvage value, is expected to last eight years, and will generate an after-tax income of $39,000 per year after straight-line depreciation. Required information The following information applies to the questions displayed below] Peng Company is considering an investment expected to generate an average net income after taxes of $3,500 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Experts are tested by Chegg as specialists in their subject area. Multiple Choice, returns on investment is computed in the following manner. Required information [The folu.ving information applies to the questions displayed below.) The equipment has a five-year life and an estimated salvage value of $50,000. Management predicts this machine has a 8-year service life and a $80,000 salvage value, and it uses strai, A machine costs $300,000 and is expected to yield an after-tax net income of $9,000 each year. Peng Company is considering an investment expected to generate an average net income after taxes of $2, 400 for three years. #define An irrigation canal contractor wants to determine whether he gifts. The investment costs $54,900 and has an estimated $8,100 salvage value. Assume Peng requires a 5% return on its investments. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) The company's required rate of return is 12 percent. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. The investment costs $51,900 and has an estimated $10,800 salvage value. Annual savings in cash operating costs are expected to total $200,000. Compute the net present value of this investment. c) 6.65%. Learn about what net present value is, how it is calculated both for a lump sum and for a stream of income over multiple years. The payback period for this investment is: a) 3.9 years b) 3 years, Hung Company accumulates the following data concerning a proposed capital investment: cash cost of $216, 236, net annual cash flows of $43,800, and present value factor of cash inflows for 10 years 5.22 (rounded). Required information [The following information applies to the questions displayed below.) Experts are tested by Chegg as specialists in their subject area. The lease term is five years. Com, Peng Company is considering an investment expected to generate an average net income after taxes of $2,200 for three years. The investment costs $47,400 and has an estimated $8,400 salvage value. Using straight-line, Wildhorse Company owns equipment that costs $1,071,000 and has accumulated depreciation of $452,200. If a potential investments internal rate of return is above the companys hurdle rate, should the investment be made? Question. Required information [The following information applies to the questions displayed below.] What is the present valu, Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. You have the following information on a potential investment. Compu, Lanyard Company is considering an investment that will generate $600,000 in cash inflows per year for 7-years and has $240,000 of cash outflows for the same period (before income taxes). What is the accounti, A company buys a machine for $70,000 that has an expected life of 6 years and no salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. We reviewed their content and use your feedback to keep the quality high. Crispen normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 per. 2003-2023 Chegg Inc. All rights reserved. All, Maude Company's required rate of return on capital budgeting projects is 9%. If the accounting ra, A company buys a machine for $76,000 that has an expected life of 7 years and no salvage value. Compute this machine's accounti, A machine costs $500,000 and is expected to yield an after-tax net income of $19,000 each year. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. an average net income after taxes of $3,200 for three years. The investment costs $49,500 and has an estimated $10,800 salvage value. You can specify conditions of storing and accessing cookies in your browser, Peng Company is considering an investment expected to generate an average net income after taxes of $2,600 for three years. 76,000 b. The salvage value of the asset is expected to be $0. Justice has long been an important aspect in managing and ensuring long-term successful buyer-supplier relationships because it is capable of explaining and predicting a wide range of relevant behaviours, attitudes and outcomes in such relationships (Alghababsheh et al., 2022; Griffith et al., 2006).It encompasses three dimensions in the buyer-supplier relationship, namely distributive . The expected future net cash flows from the use of the asset are expected to be $580,000. Each investment costs $1,000, and the firm's cost of capital is 10%. Management predicts this machine has a 9-year service life and a $140,000 salvage value, and it uses str, A machine costs $500,000 and is expected to yield an after-tax net income of $19,000 each year. Compute this machines accounting rate of return. Jimmy Co. seeks to earn an average rate of return of 18% on all capital projects. Compute the net present value of this investment. A machine costs $190,000, has a $10,000 salvage value, is expected to last nine years, and will generate an after-tax income of $30,000 per year after straight-line depreciation. should purchase a used Caterpillar mini excavator, A) The distribution of exam scores for Statistics is normally The company's required rate of return is 10% for this class of asset. a. Compute Loon s taxable inco. Management predicts this machine has an 8-year service life and a $40,000 salvage value, and it uses straight-line depreciation. Given the riskiness of the investment opportunity, your cost of capital is 27%. Management predicts this machine has an 11-year service life and a $140,000 salvage value, and it uses s, A machine costs $400,000 and is expected to yield an after-tax net income of $9,000 each year. 2. The investment costs $47,400 and has an estimated $8,400 salvage value. The firm has a beta of 1.62. A company has three independent investment opportunities. It is considering investing in a project that costs $210,000 and is expected to generate cash inflows of $85,000 at the end of each year for 4 years. Peng Company is considering an investment expected to generate an average net income after taxes of $2,500 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. The investment costs $58, 500 and has an estimated $7, 500 salvage value. Using the original cost of the asset, the unadjusted rate of return o, The Charles Company is planning to invest $450,000 in a factory machine. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Compute the accounting rate of return for this. View some examples on NPV. The investment costs $45,000 and has an estimated $6,000 salvage value. negative? The Galley purchased some 3-year MACRS property two years ago at What is the present value, Strauss Corporation is making a $91,800 investment in equipment with a 5-year life. Yearly cash inflows = 3,300 + 16,200 = Our experts can answer your tough homework and study questions. Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. The net present value (NPV) is a capital budgeting tool. The warehouse will cost $370,000 to build. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. 200,000. The estimated life of the machine is 5yrs, with no salvage value. Annual cash flow The investment costs $45,300 and has an estimated $7,500 salvage value. Solution: Annual depreciation = (Cost - Salvage value) / useful life = ($45,600 - $8,700) / 3 = $12,300 Annual cash i. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Yokam Company is considering two alternative projects. The NPV is computed as: {eq}\displaystyle \text{Present value of annuity (PVA) } = P * \frac{1 - (1 + r)^{-t}}{r} {/eq}, Become a Study.com member to unlock this answer! View some examples on NPV. Management predicts this machine has a 10-year service life and a $105,000 salvage value, and it uses straight-line depreciation. What makes this potential investment risky? Ignoring taxes, what is the most that the company would be willing to in, Strauss Corporation is making a $89,600 investment in equipment with a 5-year life.The company uses the straight-line method of depreciation and has a tax rate of 40 percent.The company's required rat, Strauss Corporation is making a $89,750 investment in equipment with a 5-year life.The company uses the straight-line method of depreciation and has a tax rate of 40 percent.The company's required rat, Strauss Corporation is making a $91,950 investment in equipment with a 5-year life. 8 years b. The IRR on the project is 12%. The following data concerns a proposed equipment purchase: Cost $136,400 Salvage value $3,600 Estimated useful life 4 years Annual net cash flows $45,700 Depreciation method Straight-line The annual average investment amount used to calculate the accounti, Landmark Company is considering an investment in new equipment costing $500,000. the net present value of this investment. Assume the company uses straight-line . The investment costs $45,600 and has an estimated $8,700 salvage value. turnover is sales div Best study tips and tricks for your exams. What is Ronis' Return on Investment for 2015? Management predicts this machine has a 9-year service life and a $80,000 salvage value, and it uses strai, A machine costs $200,000 and is expected to yield an after-tax net income of $5,000 each year. Everything you need for your studies in one place. Compute the net present value of this investment. The company uses a discount rate of 16% in its capital budgeting. Capital investment $900,000 Estimated useful life 6 years Estimated salvage value zero Estimated annual net cash inflow $213,000 Required, Sparky Company invested in an asset with a useful life of 5 years. What is the payback period in years ap, The Montana Company has decided to invest in a project that is expected to produce the following cash flows: $12,500 (year 1), $14,000 (year 2) and $9,000 (year 3). Required intormation Use the following information for the Quick Study below. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Ferrell, Liang and Renneboog (2016) as well as Chang, Chen, Chen and Peng (2019) . (Round answer to, During the year, Loon Corporation has the following transactions: $400,000 operating income; $325,000 operating expenses; $25,000 municipal bond interest; $60,000 long-term capital gain; and $95,000 short-term capital loss. The current value of the building is estimated to be $300,000. The fair value of the equipment is $476,000. The net present value is given as the present value of inflows minus the present value of outflows from the project. The approximate net present value of this project, The Zinger Corporation is considering an investment that has the following data: Year 1 Year 2 Year 3 Year 4 Year 5 Investment $17,500 $4,900 Cash inflow $3,900 $3,900 $10,000 $5,900 $5,900 Cash inflows occur evenly throughout the year. What is the accountin, A company buys a machine for $62,000 that has an expected life of 7 years and no salvage value. You have the following information on a potential investment. The investment costs $49,000 and has an estimated $8,800 salvage value. = The company is considering an investment that would yield a cash flow of $20,000 in 5 years. The company is considering an investment that would yield an after-tax cash flow of $30,000 in four years. A bond that has a $1,000 par value (face value) and a con, Strauss Corporation is making a $70,000 investment in equipment with a 5-year life. The investment costs $56,100 and has an estimated $7,500 salvage value. The machine is expected to last four years and have a salvage value of $50,000. The firm is in, A large, profitable corporation with net income exceed $20 million is considering the installation of a new machine that cost $100,000 with the expected salvage value of $20,000 after 4 years of usefu, A company buys a machine for $69,000 that has an expected life of 7 years and no salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. 2. A. The expected average rate of return, giving effect to depreciation on investment is 15%. The amount to be invested is $210,000. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. (The following information applies to the questions displayed below) Part 1 of 2 Peng Company is considering an investment expected to generate an average net income after taxes of $2,100 for three years. The profitability index for this project is: a. Assu, Peng Company is considering an investment expected to generate an average net income after taxes of $3,000 for three years. The expected net cash inflows from, A building has a cost of $750,000 and accumulated depreciation of $125,000. A machine costs $700,000 and is expected to yield an after-tax net income of $52,000 each year. investment costs $48,900 and has an estimated $12,000 salvage Equity method b. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and, The Zinger Corporation is considering an investment that has the following data: Cash inflows occur evenly throughout the year. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. The investment costs $54,000 and has an estimated $7,200 salvage value. Using a sample of Chinese-listed firms with key soil pollution regulation from 2013 to 2020, this study utilized the Difference-in-Differences method . You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Axe Corporation is considering investing in a machine that has a cost of $25,000. Management predicts this machine has a 10-year service life and a $100,000 salvage value, and it uses straight-line depreciation. Firm Value Young Corporation expects an EBIT of $16,000 every year forever. To help in this, compute the cost of capital for the firm for the following: a. (Negative amounts should be indicated by a minus sign.). Compute The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $120,000 the first year, $140,000 the second, Assume the company requires a 10% rate of return on its investments. If the accounting rate of return is 12%, what was the purchase price of the mac. What amount should Elmdale Company pay for this investment to earn a 12% return? The salvage value of the asset is expected to be $0. Negative amounts should be indicated by a minus sign.) The cost of capital is 6%. Sign up for free to discover our expert answers. Present value of an annuity of 1 The payback period for this investment Is: a) 3 years b) 3.8 years c) 4, A company is contemplating investing in a new piece of manufacturing machinery. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The investment costs $48,000 and has an estimated $10,200 salvage value. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income, Drake Corporation is reviewing an investment proposal. What method, A machine costs $400,000 and is expected to yield an after-tax net income of $9,000 each year. Axe anticipates annual net income after taxes of $1,500 from selling the product produced by the new machin, A company can buy a machine that is expected to have a three-year life and a $21,000 salvage value. EV of $1. The company's required, A company is considering a proposal that requires an initial investment of $91,100, has predicted net cash inflows of $30,000 per year for four years and no salvage value. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. First we determine the depreciation expense per year. All rights reserved. Peng Company is considering an investment expected to generate an average net income after taxes of $3,500 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Assume Peng requires a 5% return on its investments. The new present value of after tax cash flows from an investment less the amount invested. What is the average amount invested in a machine during its predicted five-year life if it costs $200,000 and has a $20,000 salvage value? Compute the payback period. The cost of the investment is. The investment costs $45,000 and has an estimated $6,000 salvage value. The investment costs $52,200 and has an estimated $9,000 salvage value. Amount Assume that net income is received evenly throughout each year and straight-line depreciation is used. The investment costs $45,000 and has an estimated $6,000 salvage value. The company uses straight-line depreciation. Compute the net present value of this investment. Compute the net present value of this investment. All rights reserved. For (n= 10, i= 9%), the PV factor is 6.4177. Currently, U.S. Treasury bills are yielding 6.75% and the expected return for the S & P 500 is 18.2%. The excess cost over the book value of an investment that is due to expected above-average earnings is labeled on the consolidated balance sheet as: a. 17 US public . Assume the company uses straight-line depreciation. The investment costs $45,600 and has an estimated $8,700 salvage value. The management predicts that this machine has a 10-year services life and a $100,000 salvage value, and, The Placque Company purchased an office building for $4,555,000. Compute the net present value of this investment. 1. The company requires a 10% rate of return on its investments. water? The following information applies to // Header code for stack // requesting to create source code It generates annual net cash inflows of $10,000 each year. Negative amounts should be indicated by a minus sign.) The investment costs $45,000 and has an estimated $6,000 salvage value. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction. The asset has an estimated salvage value of $12,000, and an estimated useful life of 10 years. check bags. John J Wild, Ken W. Shaw, Barbara Chiappetta. Assume all sales revenue is received, Elmdale Company is considering an investment that will return a lump sum of $769,700, 7 years from now. Required information Use the following information for the Quick Study below. Compute this machine's accoun, A machine costs $505,000 and is expected to yield an after-tax net income of $20,000 each year. It is considering investing in a project that costs $50,000 and is expected to generate cash inflows of $20,000 at the end of each year for 3 years. See Answer. The investment costs $59.100 and has an estimated $6.900 salvage value. Enter the email address you signed up with and we'll email you a reset link. It expects to generate $2 million in net earnings after taxes in the coming year. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $3,400 for three years. The company's desired rate of return used in the present value calculations was, A company is considering investment in a project that costs Rs. Management estimates that this machine will generate annual after-tax net income of $540. 0.9, Merrill Corp. has the following information available about a potential capital investment: Initial investment $1,800 000 Annual net income $200,000 Expected life 8 years Salvage value $240,000 Merrill's cost of capital 10% Assume the straight-line deprec, Drake Corporation is reviewing an investment proposal. If a table of present v, A company can buy a machine that is expected to have a three-year life and a $29,000 salvage value.