value. The fair value of the equipment is $476,000. All rights reserved. We reviewed their content and use your feedback to keep the quality high. The equipment has a five-year life and an estimated salvage value of $50,000. a. Compute Loon s taxable inco. ROI is equal to turnover multiplied by earning as a percent of sales. Compute the net present value of this investment. 15900 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. The company currently has no debt, and its cost of equity is 15 percent. The company pays an operating tax rate of 30%. (FV of |1, PV of $1, FVA of $1 and PVA of $1). The machine is expected to last four years and have a salvage value of $50,000. (before depreciation and tax) $90,000 Depreciation p.a. water? Negative amounts should be indicated by a minus sign.) Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Let us assume straight line method of depreciation. $ $ Accounting Rate of Return Choose . 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. 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. (Negative amounts should be indicated by a minus sign.). $2,000 per year for 10 years is the equivalent of $12,835 today ($2,000 6.4177) What is the annual depreciation expense using the straight line method? The system is expected to generate net cash flows of $13,000 per year for the next 35 years. What rate of return should you expect for your investment in Fir, If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment, which method would the investor normally use to account for this investment? The company uses straight-line depreciation. Required information (The following information applies to the questions displayed below.) Management estimates that this machine will generate annual after-tax net income of $540. Best study tips and tricks for your exams. c. Retained earnings. The investment costs $47,400 and has an estimated $8,400 salvage value. The company's required, Crispen Corporation can invest in a project that costs $400,000. A company is investing in a solar panel system to reduce its electricity costs. Management predicts this machine has an 8-year service life and a $40,000 salvage value, and it uses straight-line depreciation. 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! Assume Peng requires a 5% return on its investments. What is the present valu, Strauss Corporation is making an $85,200 investment in equipment with a 5-year life. 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). (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. The company is expected to add $9,000 per year to the net income. For l6, = 8%), the FV factor is 7.3359. The investment costs $48,900 and has an estimated $12,000 salvage value. Management predicts this machine has a 10-year service life and a $100,000 salvage value, and it uses straight-line depreciation. ), The net present value of the investment is -$6,921. (Do not round intermediate calculations.). The company's required rate of return is 12 percent. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The related cash flows, net of taxes, are ex, You have the following information on a potential investment. Compute the net present value of this investment. The investment costs $51,900 and has an estimated $10,800 salvage value. Management predicts this machine has an 11-year service life and a $60,000 salvage value, and it uses straight-line depreciation. The investment costs $59,400 and has an estimated $7,200 salvage value. Firm Value Young Corporation expects an EBIT of $16,000 every year forever. Footnote 7 Although DS567 refers to paragraph (b)(iii) of article 73 of the TRIPS, considering its high coincidence with the text of article XXI of the GATT and the consistency of "judicial practice" of the panel in the specific trial process, Footnote 8 this chapter will categorize both sources as a security . using C++ View some examples on NPV. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. Assume Peng requires a 5% return on its investments. Choose Numerator: Accounting Rate of Return Choose Denominator: = Accounting Rate of Return = Accounting rate of return, Required information [The following information applies to the questions displayed below.) Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. Annual cash flow The estimated life of the machine is 5yrs, with no salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The There is a 77 percent chance that an airline passenger will Peng Company is considering an investment expected to generate investment costs $48,900 and has an estimated $12,000 salvage Compute the net present value of this investment. a. [22] also highlight the importance of power companies improving investment portfolio planning for various energy production resources to ensure expected production value and reduce risk. If a table of present v, Grouper Company owns equipment that cost $1,044,000 and has accumulated depreciation of $440,800. Accounting Rate of Return = Net Income / Average Investment. The It generates annual net cash inflows of $10,000 each year. The investment costs $56,100 and has an estimated $7,500 salvage value. Investment required in equipment $530,000 ; Annual cash inflows $74,000 ; Salvage value $0 ; Li, Your company has been presented with an opportunity to invest in a project. ), Exercise 26-11 BAP Corporation is reviewing an investment proposal. Assume Pang requires a 5% return on its investments. Compute the net present value of this investment. #define An irrigation canal contractor wants to determine whether he What is the most that the company would be willing to invest in this, A company has a minimum required rate of return of 9%. Negative amounts should be indicated by a minus sign.) Yearly cash inflows = 3,300 + 16,200 = Our experts can answer your tough homework and study questions. The salvage value of the asset is expected to be $0. The investment costs $45,600 and has an estimated $6,600 salvage value. 45,000+6000=51,000. Amount Assume Peng requires a 15% return on its investments. The investment costs $45,000 and has an estimated $10,800 salvage value. The company anticipates a yearly net income of $3,300 after taxes of 38%, with the cash flows to be received evenly throughout each year. The investment costs $45,300 and has an estimated $7,500 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $3,200 for three years. The net present value of the investment is A) $1,470 B) ($13,550) C) $6,450, The Zinger Corporation Is considering an Investment that has the following data: Cash Inflows occur evenly throughout the year. Solution: Annual depreciation = (Cost - Salvage value) / useful life = ($45,600 - $8,700) / 3 = $12,300 Annual cash i. Goodwill. The net present value of the investment is $-1,341.55. a. The machine will cost $1,764,000 and is expected to produce a $191,000 after-tax net income to be received at the end of each year. Q: Peng Company is considering an investment expected to generate an average net. What are the investment's net present value and inte. Jimmy Co. seeks to earn an average rate of return of 18% on all capital projects. What is the return on investment? Which of, Fraser Company will need a new warehouse in eight 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). What amount should Crane Company pay for this investment to earn an 9% return? Securities Cost Fair Value Trading 120,000 124,000 Non-trading 100,000 94,000 The non-trading securities are held as long-term investments. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Compute the net present value of this investment. 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. Negative amounts should be indicated by a minus sign. A company purchased a plant asset for $55,000. Investment required $60,000,000, Salvage value after 10 years $0, Gross income $2, A company forecasts free cash flow of $40 million in three years. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. Assume the company uses straight-line depreciation. Become a Study.com member to unlock this answer! What is the present value, Strauss Corporation is making a $87,550 investment in equipment with a 5-year life. What is Roni, You are considering an investment in First Allegiance Corp. Experts are tested by Chegg as specialists in their subject area. You w, A machine that cost $720,000 has an estimated residual value of $60,000 and an estimated useful life of eleven years. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Assume Peng requires a 15% return on its investments. Common stock. Babirusa Company is considering the following investment: Initial capital investment $175,000 Estimated useful life 3 years Estimated disposal value in 3 years $25,000 Estimated annual savings in cas, Sunset Inc. is trying to determine if they should invest in a new machine that would be more efficient and would generate an annual profit of $100,000 (after tax). Assume Peng requires a 10% return on its investments. The investment costs $48,600 and has an estimated $6,300 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. distributed with a mean of 78 when mixing oil and water is the change in entropy positive or The company is considering an investment that would yield a cash flow of $20,000 in 5 years. View some examples on NPV. The profitability index for this project is: a. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $2,000 for three years. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. Apex Industries expects to earn $25 million in operating profit next year. 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. Required information (The following information applies to the questions displayed below.] The asset has no salvage value. The investment costs $59,500 and has an estimated $9,300 salvage value. The machine will cost $1,812,000 and is expected to produce a $203,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and a $23,000 salvage value. The present value of an annuity due for five years is 6.109. (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 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. and EVA of S1) (Use appropriate factor(s) from the tables provided. Peng Company is considering an investment expected to generate an average net income after taxes of $2,000 for three years. A company invests $175,000 in plant assets with an estimated 25-year service life and no salvage value. Estimate Longlife's cost of retained earnings. Compute the net present value of this investment. Yokam Company is considering two alternative projects. Assume Peng requires a 10% return on its investments. Assume Peng requires a 15% return on its investments. The company uses the straight-line method of depreciation and has a tax rate of 40 per cent. Using a sample of Chinese-listed firms with key soil pollution regulation from 2013 to 2020, this study utilized the Difference-in-Differences method . Year 0 ($400,000) initial investment Year 1 $140,000 Year 2 120,000 Year 3 100,000 Year 4 80,000, A company has a minimum required rate of return of 10%. The expected net cash inflows from, A building has a cost of $750,000 and accumulated depreciation of $125,000. 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. The investment costs $45,000 and has an estimated $6,000 salvage value. The machine will cost $1,804,000 and is expected to produce a $201,000 after-tax net income to be re, A company can buy a machine that is expected to have a three-year life and $30,000 salvage value. The building is expected to generate net cash inflows of $15,000 per year for the next 30 years. The building is expected to generate net cash inflows of $20,000 per year for the next 30 years. Required information (The following information applies to the questions displayed below.] ABC Company is adding a new product line that will require an investment of $1,500,000. 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 $2, 400 for three years. True, Richol Corp. is considering an investment in new equipment costing $180,000. Ignore income taxes. 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. 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. On whether to accept or reject a project, the NPV is interpreted on the result of the calculation. Its aim is the transition to a climate-neutral and . #12 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 $1,950 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $3,100 for three 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. Experts are tested by Chegg as specialists in their subject area. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. A company's required rate of return on capital budgeting is 15%. Assume the company requires a 12% rate of return on its investments. Compute the payback period. The company requires an 8% return on its investments. Cullumber Company is considering an investment that will return a lump sum of $942,800, 3 years from now. 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. Using the original cost of the asset, what will be the unadjusted rat, A company can buy a machine that is expected to have a three-year life and a $31,000 salvage value. 1, A machine costs $180,000 and will have an eight-year life, a $20,000 salvage value, and straight-line depreciation is used. It is mainly used to evaluate a prospective project whether it would be profitable to the investor or not. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Capital investment - $15,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow Year 1 - $7,000 Year, A company bought a machine that has an expected life of 7 years and no salvage value. Required information [The following information applies to the questions displayed below.) , ided by total investment.. total investment is current assets (inventories, accounts receivables and cash) plus fixed assets. What is the most that the company would be willing to invest in this project? Peng Company is considering an investment expected to generate an average net income after taxes of $2,700 for three years.