Question

In: Accounting

ABC is considering the purchase of an $80,000 machine on january 1, 2015. It will have...

ABC is considering the purchase of an $80,000 machine on january 1, 2015. It will have a 4 year life with no estimated salvage value.$1 line depreciation will be issued. the net cash income is estimated to be $30,000/year. The hurdle rate is 12% and the income tax rate is 40% Hint: (This project is unacceptable).

1. payback ( rounded to one decimal place) is estimated to be

a. 2.1

b. 3.1

c. 4.1

d. 5.1

2. The accounting rate of return (rounded to one decimal place) is estimated to be

a. 5.5%

b. 6.5%

c. 7.5%

d. 8.5%

3. the net present value (NPV) is estimated to be

a. $(25.334)

b. $1,110

c. $(1,015)

d. $(19,260)

4 The index of probability (rounded to one decimal place) is estimated to be

a. 0.68

b. 1.14

c. 0.99

d. 0.76

5. The Internal rate of return (IRR) ( round to one decimal place) is estimated to be

a. 9.4%

b. 10.4%

c. 11.4%

d. 8.4%

Solutions

Expert Solution

Answer with working is given below

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

A machine was acquired on January 1, 2015, at a cost of $80,000. The machine was...
A machine was acquired on January 1, 2015, at a cost of $80,000. The machine was originally estimated to have a residual value of $5,000 and an estimated life of 5 years. The machine is expected to produce a total of 100,000 components during its life, as follows: 15,000 in 2015, 20,000 in 2016, 20,000 in 2017, 30,000 in 2018, and 15,000 in 2019. Instructions (a)   Calculate the amount of depreciation to be charged each year, using each of the...
Question 4 A machine was acquired on January 1, 2015, at a cost of $80,000. The...
Question 4 A machine was acquired on January 1, 2015, at a cost of $80,000. The machine was originally estimated to have a residual value of $5,000 and an estimated life of 5 years. The machine is expected to produce a total of 100,000 components during its life, as follows: 15,000 in 2015, 20,000 in 2016, 20,000 in 2017, 30,000 in 2018, and 15,000 in 2019. Instructions (a)   Calculate the amount of depreciation to be charged each year, using each...
Question 4 A machine was acquired on January 1, 2015, at a cost of $80,000. The...
Question 4 A machine was acquired on January 1, 2015, at a cost of $80,000. The machine was originally estimated to have a residual value of $5,000 and an estimated life of 5 years. The machine is expected to produce a total of 100,000 components during its life, as follows: 15,000 in 2015, 20,000 in 2016, 20,000 in 2017, 30,000 in 2018, and 15,000 in 2019. Instructions (a)   Calculate the amount of depreciation to be charged each year, using each...
Mars Inc. is considering the purchase of a new machine that costs $80,000. This machine will...
Mars Inc. is considering the purchase of a new machine that costs $80,000. This machine will reduce manufacturing costs by $20,000 annually. Mars will use the 3-year MACRS method (shown below) to depreciate the machine, and it expects to sell the machine at the end of its 5-year life for $10,000 salvage value. The firm expects to be able to reduce net operating working capital by $8,000 when the machine is installed, but the net working capital will return to...
3Charles Company is considering the purchase of a new machine for $80,000. The machine would generate...
3Charles Company is considering the purchase of a new machine for $80,000. The machine would generate annual cash flow before depreciation and taxes of $28,778 for five years. At the end of five years, the machine would have no salvage value. The company's RRR for this investment is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate What is the internal rate of return for the machine rounded to the nearest...
1) ABC Ltd is considering a project which will require the purchase of a machine for...
1) ABC Ltd is considering a project which will require the purchase of a machine for RO1,000,000 at time zero, this machine will have a scrap value at the end of its four - year life: this will be equal to its written - down value. (25% declining balance writing - down allowance on the machine each year). Corporation tax, at a rate of 30% of taxable income, is payable. ABC Ltd's required rate of return is 12%. Operating cash...
It is now January 1, 2015, and you are considering the purchase of an outstanding bond...
It is now January 1, 2015, and you are considering the purchase of an outstanding bond that was issued on January 1, 2013. It has a 9.5% annual coupon and has a 30 year maturity. (It matures on December 31, 2042.) There is a 5 years of call protection (until December 31, 2017), after which time it can be called at 109 - That is, at 109% of par, or $1,090. Interest rates have declined since it was issued, and...
Curtis industries is considering the purchase of a new machine. It will cost $80,000, last for...
Curtis industries is considering the purchase of a new machine. It will cost $80,000, last for 8 years, and have a residual value of $10,000. If purchased, the machine is expected to increase cash inflows by $80,000 per 8 years, with $64,000 per year for 8 years in additional cash outlays required to operate the machine. The company uses the straight-line method of depreciation, and desires a 12% minimum rate of return. The present value factors of $1 due eight...
5. A machine was acquired on January 1, 2018, at a cost of $80,000. The machine...
5. A machine was acquired on January 1, 2018, at a cost of $80,000. The machine was originally estimated to have a residual value of $5,000 and an estimated life of 5 years. The machine is expected to produce a total of 100,000 components during its life, as follows: 15,000 in 2018, 20,000 in 2019, 20,000 in 2020, 30,000 in 2021, and 15,000 in 2022. Instructions (a)   Calculate the amount of depreciation to be charged each year, using each of...
The management of ABC Corporation is considering the purchase of a new machine costing $430,000. The...
The management of ABC Corporation is considering the purchase of a new machine costing $430,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation by using the NPV methodology calculations Year Income from Operations Net Cash Flow 1 $100,000 $180,000...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT