Assume Peng requires a 10% return on its investments. Using the orig, A building has a cost of $500,000 and accumulated depreciation of $40,000. The investment costs $49,500 and has an estimated $10,800 salvage value. Equity method b. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. It is considering investing in a project that costs $210,000 and is expected to generate cash inflows of $85,000 at the end of each year for 4 years. Yearly net cash inflows (before taxes) from the machine are estimated at $140,000. What is the current value of the company? See Answer. Assume Peng requires a 10% return on its investments. 17 US public . Estimate Longlife's cost of retained earnings. Compute the net present value of this investment. Compute the net present value of this investment. Assume Peng requires a 15% return on its investments. A machine costs $190,000, has a $10,000 salvage value, is expected to last nine years, and will generate an after-tax income of $30,000 per year after straight-line depreciation. The present value of the future cash flows, at the company's desired rate of re, E company is a lessee with a capital lease. (1) Determine whet, Lt. Dan Corporation invested $80,000 in a manufacturing equipment. Compute. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Compute the net present value of this investment. Peng Company is considering an investment expected to generate an average net income after taxes of $3,000 for three years. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The investment costs $45,000 and has an estimated $6,000 salvage value. This site is using cookies under cookie policy . Management predicts this machine has a 9-year service life and a $140,000 salvage value, and it uses str, A machine costs $500,000 and is expected to yield an after-tax net income of $19,000 each year. The facts on the project are as tabulated. Assume the company uses straight-line . 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 5% return on its investments. the accounting rate of return for this investment; assume the company uses straight-line depreciation. = Prepare the journal, You have the following information on a potential investment. Explain. 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. 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 $1,950 for three years. The company anticipates a yearly net income of $2,950 after taxes of 34%, with the cash flows to be received evenly throughout each year. 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. QS 25-7 Computation of accounting rate of return LO P2 Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The present value of the future cash flows at the company's desired rate of return is $100,000. 2003-2023 Chegg Inc. All rights reserved. (PV of. The investment costs $45,600 and has an estimated $8,700 salvage value. The investment costs $45,000 and has an estimated $6,000 salvage value. S4 000 per year for 6 years accumulates to $29,343.60 ($4,000 7.3359). Assume Peng requires a 15% return on its investments. The net present value is given as the present value of inflows minus the present value of outflows from the project. 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%. Assume Peng requires a 15% return on its investments. What is the accountin, A company buys a machine for $62,000 that has an expected life of 7 years and no salvage value. The business environment, namely market uncertainty and competition intensity, is also analysed in association with the firm's strategic orientation. b. 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. The investment costs $47,400 and has an estimated $8,400 salvage value. (The following information applies to the questions displayed below) Part 1 of 2 Peng Company is considering an investment expected to generate an average net income after taxes of $2,100 for three years. What is the present value, Strauss Corporation is making a $87,550 investment in equipment with a 5-year life. The investment costs $45,600 and has an estimated $8,700 salvage value. For example: How much would you need to invest today at 10% compounded semiannually to accumulate $5,000 in 6 years from today? Compute the net present value of this investment. The building is expected to generate net cash inflows of $20,000 per year for the next 30 years. 45,000+6000=51,000. The investment costs $45,300 and has an estimated $7,500 salvage value. Compute the payback period. 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! Peng Company is considering an investment expected to generate an average net income after taxes of $3,400 for three years. A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. A new operating system for an existing machine is expected to cost $, A machine costs $700,000 and is expected to yield an after-tax net income of $52,000 each year. Crispen normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 per. The initial outlay of the project would be $800,000 and the project's assets would have a residual value of $50,000 at the end o. Calculate its book value at the end of year 10. 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. The company pays an operating tax rate of 30%. Assume Peng requires a 10% return on its investments. 2. ABC Company is adding a new product line that will require an investment of $1,500,000. Cullumber Company is considering an investment that will return a lump sum of $942,800, 3 years from now. Assu, Peng Company is considering an investment expected to generate an average net income after taxes of $3,000 for three years. For l6, = 8%), the FV factor is 7.3359. The company has projected the following annual cash flows for the investment. Cash Flow Annual cash flow Present Value of an Annuity of1 Residual value Present Value of 1 Select Chart Amount x PV FactorPresent Value $ 8,700 x Present value of cash inflows Immediate cash outflows Net present value 45,600 Assume that net income is received evenly throughout each year and straight-line depreciation is used. 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. What is the accountin, A company buys a machine for $77,000 that has an expected life of 6 years and no salvage value. Management predicts this machine has a 10-year service life and a $105,000 salvage value, and it uses straight-line depreciation. What is the present value, The Best Manufacturing Company is considering a new investment. The management of Samsung is planning to invest in a new companywide computerized inventory tracking system. Anglemenesis Company is planning to spend $84,000 for a new machine that is to be depreciated on a straight-line basis over 10 years with no salvage value. The amount to be invested is $210,000. 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. The investment costs $49,800 and has an estimated $11,400 salvage value. What amount should Flower Company pay for this investment to earn an 11% return? Compute the accounting sane of return for this investment assume the company uses straight-line depreciation. The machine is expected to last four years and have a salvage value of $50,000. 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. The management of Bischke Corporation is investigating an investment in equipment that would have a useful life of 8 years. The company has projected the following annual cash flows f, Lt. Dan Corporation invested $80,000 in a manufacturing equipment. Compute the net present value of this investment. Assume Peng requires a 5% return on its investments. The following information applies to the questions displayed below.J Peng Company is considering an investment expected to generate an average net income after taxes of $2,800 for three years. Get access to this video and our entire Q&A library, How to Calculate Net Present Value: Definition, Formula & Analysis. Compute the net present value of this investment. If a table of present v, Grouper Company owns equipment that cost $1,044,000 and has accumulated depreciation of $440,800. The investment costs $45,600 and has an estimated $6,600 salvage value. The income tax depreciation method referred to as CCA: a) Allows a corporation some flexibility in choosing the class an asset is assigned to. John J Wild, Ken W. Shaw, Barbara Chiappetta. The investment costs$45,000 and has an estimated $6,000 salvage value. Assume the company uses straight-line depreciation. What is Ronis' Return on Investment for 2015? The Galley purchased some 3-year MACRS property two years ago at If a potential investments internal rate of return is above the companys hurdle rate, should the investment be made? Assume Peng requires a 5% return on its investments. Compute the net present value of this investment. The fair value of the equipment is $464,000. What amount should Elmdale Company pay for this investment to earn a 12% return? A company is investing in a solar panel system to reduce its electricity costs. Present value Management estimates that this machine will generate annual after-tax net income of $540. Compute the net present value of this investment. The Melton Company's required rate of return on capital budgeting projects is 16%. A machine that costs $770,000 has an estimated residual value of $70,000 and an estimated useful life of 7 years. The investment costs $45,000 and has an estimated $6,000 salvage value. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income, Elmdale Company is considering an investment that will return a lump sum of $725,500, 6 years from now. 0.9, Merrill Corp. has the following information available about a potential capital investment: Initial investment $1,800 000 Annual net income $200,000 Expected life 8 years Salvage value $240,000 Merrill's cost of capital 10% Assume the straight-line deprec, Drake Corporation is reviewing an investment proposal. (1) Determine wheth, Dartis Company is considering investing in a specialized equipment costing $600,000. B. Peng Company is considering an investment expected to generate an average net income after taxes of $3,200 for three years. If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon value, to the ne, Management of a firm with a cost of capital of 12 percent is considering a $100,000 investment with annual cash flow of $44,524 for three years. Required information (The following information applies to the questions displayed below.] Using the factors of n = 12 and i= 5% (12 semiannual periods and a semiannual rate of 5%), the factor is 0.5568. Assume Peng requires a 5% return on its investments. View some examples on NPV. (Round your computations and answers to 0 decimal p, BAP Corporation is reviewing an investment proposal. Compute the net present value of this investment. 2003-2023 Chegg Inc. All rights reserved. The net cash flows are estimated to be $7,610 per year for the next 5 years and no salvage value is anticipated. $ $ Accounting Rate of Return Choose . The investment costs $59,400 and has an estimated $7,200 salvage value. Compute this machine's accounti, On 1/1, a company buys equipment with a cost of $8,100, an estimated salvage value of $1,100, and an estimated useful life of 7 years. The investment costs $45,600 and has an estimated $8,700 salvage value. The cost of the asset is $700,000 and it will be depreciated using s, The MoMi Corporation's income before interest, depreciation and taxes, was $1.7 million in the year just ended, and it expects that this will grow by 5% per year forever. Tradin, Drake Corporation is reviewing an investment proposal. What is the present valu, Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. If the accounting ra, A company buys a machine for $76,000 that has an expected life of 7 years and no salvage value. These assets contribute $28,000 to annual net income when depreciation is computed on a straight-line basis. Assume Pang requires a 5% return on its investments. 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). a. Compute this machine's accoun, A machine costs $500,000 and is expected to yield an after-tax net income of $15,000 each year. What is the average amount invested in a machine during its predicted five-year life if it costs $200,000 and has a $20,000 salvage value? Negative amounts should be indicated by a minus sign. The investment costs $45,000 and has an estimated $6,000 salvage value. 2.3 Reverse innovation. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Required information [The following information applies to the questions displayed below.] You can specify conditions of storing and accessing cookies in your browser, Peng Company is considering an investment expected to generate an average net income after taxes of $2,600 for three years. The present value of an annuity due for five years is 6.109. 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 . Required information [The following information applies to the questions displayed below.) Required information (The following information applies to the questions displayed below.) copyright 2003-2023 Homework.Study.com. The investment has zero salvage value. Accounting 202 Final - Formulas and Examples. a. Management predicts this machine has an 8-year service life and a $40,000 salvage value, and it uses straight-line depreciation. Compute the net present value of this investment. The warehouse will cost $370,000 to build. 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. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Yearly cash inflows = 3,300 + 16,200 = Our experts can answer your tough homework and study questions. Peng Company is considering an Investment expected to generate an average net income after taxes of $3,000 for three years. Assume Peng requires a 10% return on its investments. A company is deciding to invest in a new project at a cost of $2 million dollars. What amount should Elmdale Company pay for this investment to earn a 8% return? The investment costs $48,900 and has an estimated $12,000 salvage value. The company anticipates a yearly net income of $3,800 after taxes of 16%, with the cash flows to be received evenly throughout each year. The payback period, You are considering investing in a start up company. The investment costs $45,000 and has an estimated $6,000 salvage value. If t, Your company just bought an asset for $200,000 with an estimated useful life of 5 yrs, and a salvage value of $10,000. Jimmy Co. seeks to earn an average rate of return of 18% on all capital projects. X A company invests $175,000 in plant assets with an estimated 25-year service life and no salvage value. Using straight-line, Wildhorse Company owns equipment that costs $1,071,000 and has accumulated depreciation of $452,200. Projected annual cash flows are: Year 1 $500,000 Year 2 $600,000 Year 3 $700,000 Year 4 $400,000 Calculate the NPV and the IRR. The company has an all-equity capital structure, and its cost of equity capital is 15 percent. 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 . 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. Become a Study.com member to unlock this answer! Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation.