Question

In: Accounting

Cost Accounting II Assignment III (LO 7) McLynn, Inc. is considering the purchase of a new...

Cost Accounting II

Assignment III

(LO 7)

McLynn, Inc. is considering the purchase of a new machine that will cost $ Plug in the last 6 digits of your ID. The machine has an estimated useful life of 3 years. Assume that the company uses the straight-line method. The new machine will have a $10,000 salvage value at the end of its estimated useful life. The machine is expected to save the company $85,000 per year in operating expenses excluding depreciation expense. Cash flow from terminal disposal of motor $8,000.   McLynn uses a 40% estimated income tax rate and a 16% required rate of return to evaluate capital projects.

Discount rates for a 16% rate are as follows:

                                         Present Value of an

Present Value of $1          Ordinary Annuity of $1

Year 1 .862                                       .862

Year 2 .743                                      1.605

Year 3 .641                                      2.246

Instructions: Using excel

Calculate (a) net present value, (b) payback period, (c) discounted payback period

ID# 170022

Solutions

Expert Solution

ekkarill92 answered 5 months ago
Next > < Previous

Related Solutions

Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $35,000; it is now five years old, and it has a current market value of $15,000.00. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $17,500 and an annual depreciation expense of $3,500. The old oven can be used for six more...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $47,000; it is now five years old, and it has a current market value of $22,000. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $23,500 and an annual depreciation expense of $4,700. The old oven can be used for six more...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $38,000; it is now five years old, and it has a current market value of $16,500. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $19,000 and an annual depreciation expense of $3,800. The old oven can be used for six more...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $42,000; it is now five years old, and it has a current market value of $18,500. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $21,000 and an annual depreciation expense of $4,200. The old oven can be used for six more...
Mom’s Cookies, Inc., is considering the purchase of new cookie oven. The original cost of the...
Mom’s Cookies, Inc., is considering the purchase of new cookie oven. The original cost of the old oven was $30,000; it is now five years old; and has a current market value of $5,000. The old oven is being depreciated over a 10 year life towards a zero estimated salvage value on a straight line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000. Management is contemplating the purchase of a new oven...
Gluon Inc. is considering the purchase of a new high pressureglueball. It can purchase the...
Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $60,000 and sell its old low-pressure glueball, which is fully depreciated, for $10,000. The new equipment has a 10-year useful life and will save $14,000 a year in expenses. The opportunity cost of capital is 11%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do...
(course code:ACCT 231) Cost and Management Accounting Assignment E12-7 Entries for Factory Overhead. Black Inc. assembles...
(course code:ACCT 231) Cost and Management Accounting Assignment E12-7 Entries for Factory Overhead. Black Inc. assembles and sells hand drills. All parts are purchased, and the cost of the parts per drill cost $50. Labor is paid on the basis of $32 per drill assembled. Because the company handles only this one product, the unit cost base is used for applying factory overhead at a predetermined rate. Estimated factory overhead for the coming period, based on a production of 30,000...
Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new...
Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new system, net of set-up and delivery costs, will be $1.6 million. The new system will provide annual before-tax cost savings of $500,000 for the next five years. The increased efficiency of the new system will lower net working capital by $200,000 today. The CCA rate on the new system will be 30%. At the end of five years, the system can be salvaged for...
Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new...
Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new system, net of set-up and delivery costs, will be $1.6 million. The new system will provide annual before-tax cost savings of $500,000 for the next five years. The increased efficiency of the new system will lower net working capital by $200,000 today. The CCA rate on the new system will be 30%. At the end of five years, the system can be salvaged for...
Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new...
Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new system, including set-up and delivery costs of $20,000, will be $2 million. The new system will provide annual before-tax cost savings of $650,000 for the next five years. The increased efficiency of the new system will lower net working capital by $150,000 today. The CCA rate on the new system will be 30%. At the end of five years, the system can be salvaged...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT