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The company uses the straight-line method of depreciation and has a tax rate of 40 percent. Assume Peng requires a 15% return on its investments. The facts on the project are as tabulated. Compute the net present value of this investment. The company is expected to add $9,000 per year to the net income. The company requires a 10% rate of return on its investments. The amount to be invested is $210,000. What is the minimum salvage value that would make the investment attractive assuming a discount rate of 12%? A novel dynamic modeling method for a multi-product production line is developed to investigate dynamic properties of the system under random disruptions such as machine failures and market demand . 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. a. Present value Determine. The investment costs $45,600 and has an estimated $6,600 salvage value Compute the accounting rate of return for this investment, assume the company uses straight-line depreciation. See Answer. The project would require a $28,000 initial investment and has a salvage value of $2,000, A company has a minimum required rate of return of 9%. Compute the net present value of this investment. Required information (The following information applies to the questions displayed below.) Assume the company uses straight-line depreciation. The building is expected to generate net cash inflows of $20,000 per year for the next 30 years. The amount, to be invested, is $100,000. The Controller asks you to use a depreciation method that would produce the highest charge against income after three years. #define An irrigation canal contractor wants to determine whether he There is a 77 percent chance that an airline passenger will The investment costs $59,400 and has an estimated $7,200 salvage value. a. 2003-2023 Chegg Inc. All rights reserved. Assume Peng requires a 10% return on its investments. The equipment has a useful life of 5 years and a residual value of $60,000. Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. Estimate Longlife's cost of retained earnings. and EVA of S1) (Use appropriate factor(s) from the tables provided. Experts are tested by Chegg as specialists in their subject area. The company uses the straight-line method of depreciation and has a tax rate of 40 per cent. 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). Assu, Peng Company is considering an investment expected to generate an average net income after taxes of $3,000 for three years. For example: What is the future value of $4,000 per ye ar for 6 years assuming an annual interest rate of 8%. c) 6.65%. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. 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. It is mainly used to evaluate a prospective project whether it would be profitable to the investor or not. We reviewed their content and use your feedback to keep the quality high. straight-line depreciation ), Exercise 26-11 BAP Corporation is reviewing an investment proposal. A new operating system for an existing machine is expected to cost $690,000 and have a useful life of six years. The investment costs $45,000 and has an estimated $6,000 salvage value. 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 investment costs $45,000 and has an estimated $10,800 salvage value. 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. What is the most that the company would be willing to invest in this project? Capital investment - $100,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow Year 1 - $50,000 Year 2 - $47,000 Year 3 - $44,000 Required rate, You have the following information on a potential investment: Capital Investment - $100,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow: Year 1 - $50,000 Y, Lt. Dan Corporation invested $90,000 in manufacturing equipment. A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. (Round your computations and answers to 0 decimal p, BAP Corporation is reviewing an investment proposal. (For calc, Natt Company is considering undertaking a project that would yield annual profits (after depreciation) of $68,000 for 5 years. The lease term is five years. Assume Pang requires a 5% return on its investments. The expected future net cash flows from the use of the asset are expected to be $580,000. Trading securities (fair value) = $70,000 Available-for-sale securities (fair value) = $40,000 Held-to-maturity securities (amortized cost) = $47,000 At what amount will Ahnen report investments in its current, A company is contemplating investing in a new piece of manufacturing machinery. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. 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. Good estimates are available for the initial investment and the a, Pito Company has been in operation for several years. 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. Peng Company is considering an investment expected to generate an average net income after taxes of $2,900 for three years. The investment costs $45,600 and has an estimated $8,700 salvage value. value. Talking on the telephon 7 years c. 6 years d. 5 years, The amount of the estimated average income for a proposed investment of $90,000 in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of 4 years, no residual value. The building is expected to generate net cash inflows of $15,000 per year for the next 30 years. These assets contribute $28,000 to annual net income when depreciation is computed on a straight-line basis. The company is expected to add $9,000 per year to the net income. Present value of an annuity of 1 Peng Company is considering an investment expected to generate an average net income after taxes of $3,500 for three years. 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. A negative NPV would suggest that the project is not worth investing since it will probably yield to a loss while a positive NPV would suggest otherwise. Required information Use the following information for the Quick Study below. The investment costs $54,900 and has an estimated $8,100 salvage value. The salvage value of the asset is expected to be $0. The equipment will be depreciated on a straight-line basis over 5-year life and is expected to generate net cash inflows of $45,000 the first year, $65,000 the second year, and $, The Seago Company is planning to purchase $436,400 of equipment with an estimated seven-year life and no estimated salvage value. Compute this machine's accoun, A machine costs $300,000 and is expected to yield an after-tax net income of $9,000 each year. The investment costs$45,000 and has an estimated $6,000 salvage value. The company is expected to add $9,000 per year to the net income. Compute the net present value of this investment. Yearly depreciation = (56,100 - 7,500) / 3 = $16,200.00. Management predicts this machine has a 12-year service life and a $40,000 salvage value, and it uses straight-line depreciation. turnover is sales div $40,000 Economic life 5 years Salvage value Zero Tax rate payable (assume paid in year of income) 30, A machine costs $500,000, has a $28,700 salvage value, is expected to last eight years, and will generate an after-tax income of $72,000 per year after straight-line depreciation. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. (PV of $1. Capital investment - $15,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow: -Year 1 - $7,00, Compute the net present value of each potential investment. Corresponding with the IRS in writing What is the cash payback period? copyright 2003-2023 Homework.Study.com. The investment costs $45,000 and has an estimated $6,000 salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. If the accounting rate of return is 12%, what was the purchase price of the mac. S4 000 per year for 6 years accumulates to $29,343.60 ($4,000 7.3359). A machine costs $210,000, has a $16,000 salvage value, is expected to last nine years, and will generate an after-tax income of $47,000 per year after straight-line depreciation. Assume Peng requires a 15% return on its investments. t, A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 per year after straight-line depreciation. The present value of the future cash flows at the company's desired rate of return is $100,000. Select Chart Amount x PV Factor = Present Value Cash Flow Annual cash flow Residual value Net present value, Required information [The folu.ving information applies to the questions displayed below.) Assume Peng requires a 10% return on its investments. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. 2003-2023 Chegg Inc. All rights reserved. TABLE B.4 f= [(1 + i)"-1Vi Future Value of an Annuity of 1 Rate Periods 1% 2% 3% 6% 7% 8% 9% 10% 12% 15% 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 0000 .0000 1.0000 10000 2.0100 2.0200 2.0300 2.0400 2.0500 2.0600 2.0700 2.0800 2.0900 2.1000 2.1200 3.0301 3.0604 3.0909 3.1216 3.1525 3.1836 3.2149 3.2464 3.2781 3.3100 3.3744 4.0604 4.1216 4.1836 4.2465 4.3101 4.3746 4.4399 5.1010 5.2040 5.3091 5.4163 5.5256 5.6371 5.7507 5.8666 5.9847 6.1051 6.3528 6.1520 6.3081 6.4684 6.6330 6.8019 6.9753 7.1533 7.3359 7.5233 7.7156 8.1152 7.2135 7.4343 7.6625 7.8983 8.1420 8.3938 8.6540 8.9228 9.2004 9.4872 10.0890 8.2857 8.5830 8.8923 9.2142 9.5491 9.8975 10.2598 10.6366 11.0285 11.4359 12.2997 9.3685 9.7546 10.1591 10.5828 11.0266 11.4913 11.9780 12.4876 13.0210 13.5795 14.7757 1.0000 2.1500 3.4725 4.9934 6.7424 8.7537 11.0668 4.5061 4.5731 4.6410 4.7793 16.7858 10 10.4622 10.9497 11.4639 12.0061 12.5779 13.1808 13.8164 14.4866 15.1929 15.9374 17.5487 20.3037 11.5668 12.1687 12.8078 13.4864 14.2068 14.9716 15.7836 16.6455 7.5603 18.5312 20.6546 24.3493 12.6825 13.4121 14.1920 15.0258 15.9171 16.8699 17.8885 18.9771 20.1407 21.3843 24.1331 12 13 13.8093 14.6803 15.6178 16.6268 17.7130 18.8821 20.1406 21.4953 22.9534 24.5227 28.0291 14 14.9474 15.9739 17.0863 18.2919 19.5986 21.0151 22.5505 24.2149 26.0192 27.9750 32.3926 40.5047 15 16 17.2579 18.6393 20.1569 21.8245 23.6575 25.6725 27.8881 30.3243 33.0034 35.9497 42.7533 55.7175 17 18.4304 20.0121 21.7616 23.6975 25.8404 28.2129 30.8402 33.7502 36.9737 40.5447 48.8837 65.0751 18 19 20.8109 22.8406 25.1169 27.6712 30.5390 33.7600 37.3790 41.4463 46.0185 51.1591 63.4397 88.2118 20 22.0190 24.2974 26.8704 29.7781 33.0660 36.7856 40.9955 45.7620 51.1601 57.2750 72.0524 102.4436 25 30 35 41.6603 49.9945 60.4621 73.6522 90.3203 111.4348 138.2369 172.3168 215.7108 271.0244 431.6635 40 48.8864 60.4020 75.4013 95.0255 120.7998 154.7620 199.6351 259.0565 337.8824 442.5926 767.0914 1,779.0903 29.0017 34.3519 16.0969 7.2934 18.5989 20.0236 21.5786 23.2760 25.1290 27.1521 29.3609 31.7725 37.2797 47.5804 19.6147 21.4123 23.4144 25.6454 28.1324 30.9057 33.9990 37.4502 41.3013 45.5992 55.7497 75.8364 28.2432 32.0303 36.4593 41.6459 47.7271 54.8645 63.2490 73.1059 84.7009 98.3471 133.3339 212.7930 34.7849 40.5681 47.5754 56.0849 66.4388 79.0582 94.4608 113.2832 136.3075 164.4940 241.3327 434.7451 881.1702 Used to calculate the future value of a series of equal payments made at the end of each period.