A mini-mart needs a new freezer and the initial investment will cost $350,000. Incremental revenues, including cost savings, are $212,500, and incremental expenses, including depreciation, are $125,000. There is no salvage value. What is the accounting rate of return (ARR)? fill in the blank %
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A mini-mart needs a new freezer and the initial investment will cost $350,000. Incremental revenues, including cost savings, are $212,500, and incremental expenses, including
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- You manufacture car parts using equipment and direct labor. You are planning to buy a new machine for $1,000. The machine will generate net cash flows of $250 a year for 10 years. The salvage value after 10 years is zero. Compute ARR (accounting rate of return). O 50% O 15% 25% 30% O not enough information - need to know accounting income and accounting depreciationBaird Rentals can purchase a van that costs $110,000; it has an expected useful life of five years and no salvage value. Baird uses straight-line depreciation. Expected revenue is $40,425 per year. Assume that depreciation is the only expense associated with this Investment. Required a. Determine the payback period. Note: Round your answer to 1 decimal place. b. Determine the unadjusted rate of return based on the average cost of the investment. Note: Round your answer to 1 decimal place. (l.e., .234 should be entered as 23.4). a. Payback period b. Unadjusted rate of return years %Stuart Rentals can purchase a van that costs $105,000; it has an expected useful life of three years and no salvage value. Stuart uses straight-line depreciation. Expected revenue is $52,220 per year. Assume that depreciation is the only expense associated with this investment. Required a. Determine the payback period. (Round your answer to 1 decimal place.) b. Determine the unadjusted rate of return based on the average cost of the investment. (Round your answer to 1 decimal place. (i.e., .234 should be entered as 23.4).) a. Payback period years b. Unadjusted rate of return %
- Peng Company is considering buying a machine that will yield income of $2,400 and net cash flow of $15,100 per year for three years. The machine costs $46,200 and has an estimated $8,100 salvage value. Compute the accounting rate of return for this investment. Accounting Rate of Return Numerator: Denominator: Accounting Rate of Return Accounting rate of returnA firm urgently needs a large printer and will either lease a printer at an end-of-year cost of $ 5000 for a 6 year period, or they will purchase the printer at an initial cost of $50,000. If purchased, the printer will have a zero salvage value at the end of 6- years life. No other costs are to be considered. MARR is 4%. What is the best investment decision on the basis of the internal rate of return. O a. IRR could not be calculated due to no change in cashflow sign Ob. Negative IRR is not justified and is not applied here to make a proper decision C. Lease o d. BuyThe Fine Clothing Factory wants to replace an old machine with a new one. The old machine can be sold to a small factory for R10 000. The new machine would increase annual revenue by R150 000 and annual operating expenses by R60 000. The new machine would cost R360 000. The estimated useful life of the machine is 12 years with zero salvage value. Using Average rate of return (ARR), Should Fine Clothing Factory purchase the machine if management desired rate of return of 15% on all capital investments? Show all the calculations and motivate your answer.
- Peng Company is considering buying a machine that will yield income of $2,400 and net cash flow of $16,000 per year for three years. The machine costs $48,900 and has an estimated $8,100 salvage value. Compute the accounting rate of return for this investment. Numerator: Accounting Rate of Return Denominator: = Accounting Rate of Return Accounting rate of returnA management company is considering purchasing a $27,000 machine that would reduce operating costs by $7,000 per year. At the end of the 5 years of the machine's useful life, it will be zero salvage value. The company requires a rate of return of 12%. 1. Determine the net present value of the investment of the machine? 2.What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?The management of East Manufacturing needs a new high tech sorting machine and has two different proposals under consideration. They require a rate of return of 10% (discount rate) and the Accounting Department has prepared the following information: Initial Investment Useful Life of Equipment Net Annual Cash Flow Salvage Value Investment B: Click to open:↓ Ⓡ Clearly label and show calculations for full credit! No calculations = No credit. 1) Calculate the Payback Period for each option: Investment A: 2) Calculate the Net Present Value of each option: Investment A: $ 3,700,000 7 years $ 900,000 $0 Investment B: A $3,400,000 7 years $800,000 $90,000 B