ems iYour firm is considering purchasing a machine with the following annual, end-of-year,book investment accounts.Gross investmentLess: AccumulateddepreciationNet investmentYear 0Year 1Year 2Year 3Year 4$ 65,000 $ 65,000 $65.000 $ 65,000 $65,000016,250 32,500 48,750 65,000AAR$ 65,000 $48.750 $ 32.500 $ 16,250 $0The machine generates, on average. $4.900 per year in additional net income. What isthe average accounting return for this machine? (Do not round intermediatecalculations and enter your answer as a percent rounded to 2 decimal places, e.g..32.16.)Saved

The question is based on the concept of Financial Accounting.Average Accounting Return is calculated…

Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Gross investment Less: Accumulated depreciation Net investment Year 0 Year 1 Year 2 Year 3 Year 4 $ 65,000 $ 65,000 $ 65,000 $ 65,000 $65,000 0 16,250 32,500 48,750 65,000 $ 65,000 $48.750 $ 32,500 $16,250 $ 0

Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Gross investment Less: Accumulated depreciation Net investment Year 0 Year 1 Year 2 Year 3 Year 4 $ 65,000 $ 65,000 $ 65,000 $ 65,000 $65,000 0 16,250 32,500 48,750 65,000 $ 65,000 $48.750 $ 32,500 $16,250 $ 0

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...

See similar textbooks

Similar questions

Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Gross investment Less: Accumulated depreciation Net investment AAR Year O $ 71,000 $ 0 % Year 2 Year 1 Year 3 Year 4 71,000 $ 71,000 $ 71,000 $ 71,000 17,750 35,500 53,250 71,000 The machine generates, on average, $7,300 per year in additional net income. What is the average accounting return for this machine? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) $ 71,000 $ 53,250 $35,500 $ 17,750 $ 0
our firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Purchase Date Year 1 Year 2 Year 3 Year 4 Gross investment $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 Less: Accumulated depreciation 0 13,750 27,500 41,250 55,000 Net investment $ 55,000 $ 41,250 $ 27,500 $ 13,750 $ 0 The machine generates, on average, $5,300 per year in additional net income. What is the average accounting return for this machine? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) AAR %
RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows: Equipment 1 Equipment 2 First Cost P 12,000 P 18,000 Salvage Value P 600 P 2,000 Annual Operation P 3,200 P 2,500 Annual Maintenance P 1,200 P 1,000 Taxes & Insurance 3% 3% Life, years 10 15 Money is worth at least 16%. Which equipment should be selected? Use: a. Rate of Return Method Rate of Return Method Annual Cost Method NOTE: Show cashflow diagram.
Should WLW lease or construct their own production facilityOption 1: ConstructCosts to incur:Buying land, construct building and getting ready for use$ 360,000Taxes, insurance, and repairs (per year)$ 34,000Intended years of use20Projected market value in 20 years$ 1,600,000Maximum down payment WLW can make$ 500,000Remainder in four payments of;$ 160,000Revenue opportunityBuilding annex will be leased to a tenant and will generate a lease revenue (per year) for 10 years$60,000Option 2: LeaseIntended years of use20First lease payment due now$ 90,000Rest of the lease payments (years 2-20)$ 90,000Operating costs to be paid by WLWRepairs (annual)$ 9,000Maintenance (annual)$ 26,000Initial one-time deposit, will be returned in year 20$ 40,000Required rate of return15%Methodology:The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction.Based on the analysis, they will recommend the preferred option (construction or leasing).
Objective: Should WAW lease or construct their own production facilityOption 1: ConstructCosts to incur:Buying land, construct building and getting ready for use$ 230,000Taxes, insurance, and repairs (per year)$ 30,000Intended years of use20Projected market value in 20 years$ 1,600,000Maximum down payment WAW can make$ 500,000Remainder in four payments of;$ 180,000Option 2: LeaseIntended years of use20First lease payment due now$ 100,000Rest of the lease payments (years 2-20)$ 90,000Operating costs to be paid by WAWRepairs (annual)$ 7,000Maintenance (annual)$ 25,000Initial one-time deposit, will be returned in year 20$ 40,000Required rate of return15%Methodology:The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction.Based on the analysis, they will recommend the preferred option (construction or leasing).
Quary Company is considering an investment in machinery with the following information. Initial investment Useful life Salvage value Expected sales per year (a) Compute the investment's annual income and annual net cash flow. (b) Compute the investment's payback period. Required A Required B Complete this question by entering your answers in the tabs below. $ 335,000 9 years $ 20,000 16,750 units Annual Amounts Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Selling price per unit Compute the investment's annual income and annual net cash flow. Expenses Income Net cash flow $ 75,375 35,000 8,375 $ 10
A firm is trying to decide which of two machines to purchase as described in in the table below. Using the interest rate 9% or 0.09, use present worth analysis to determine which machine, if either, should be purchased. Show all your work. Machine: A - B First Cost: $800 - $600 Annual Net Benefit: $130 - $230 Salvage Value: $40 - $20 Usefil Life (years): 9 - 3
Written report with the following content: • Appendix1: Leasing Explain the calculations. Your recommendations Objective: Should FFT lease or construct their own production facility Option 1: Construct Costs to incur: Buying land, construct building and getting ready for use (FFT has these funds available in their bank account today so no mortgage is needed) $ 1,200,000 Taxes, insurance, and repairs (per year) $110,000 Intended years of use 15 Projected market value in 15 years $ 1,250,000 Option 2: Lease Intended years of use 15 Deposit required today (this deposit will be returned to FFT when the lease contract is complete is 15 years) $ 100,000 Annual lease payment $ 160,000 Property taxes (annual) to be paid by FFT $ 15,000 Insurance (annual) to be paid by FFT $ 15,000 Required rate of return 8% Methodology: The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction. Based on the analysis, they will recommend the preferred option…
A firm is trying to decide between two equipment for a production activity. The following information is available. Equip 1 Equip 2 Initial investment $25,000 $17,000 7 years 7 years $0 Useful life Salvage value Operating cost per hour $0 $4.30 $5.00 At a MARR of 8% per year, determine the breakeven number of operating hours per year. Click the icon to view the interest and annuity table for discrete compounding when i = 8% per year. The breakeven number of operating hours per year is O A. 1,866 O B. 2,195 O C. 1,756
еВook Show Me How Print Item Average Rate of Return The following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals: 3D Printer Truck Amount of investment $76,000 $48,000 Useful life 4 years 7 years Estimated residual value Estimated total income over the useful life $7,600 $12,600 Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place. 3D Printer % Truck
Com/ilmn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSession Locator- der eBook < Average Rate of Return The following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals: 3D Printer Truck $32,000 9 years Amount of investment Useful life 3D Printer Estimated residual value Estimated total income over the useful life $8,640 Determine the expected average rate of return for each Truck Check My Work Show Me How % % $96,000 4 years 3 0 0 Print Item $10,080 proposal. If required, round your answers to one decimal place 0 M
A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A:PurchaseCost of Equipment 700,581Salvage Value 105,896Daily operating cost 534Economic life, years 10 Alternative B: Rental at 1,539 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.