Columbia Comp. invests RM 270,000 in a project that is depreciated on a straight-line basis over three years to zero disposal value. The relevant details for the project over its 3-year life are shown below. 2 Calculate the accounting rate of return for the project. Year 1 Year 2 Year 3 Sales RM 220,000 RM 190,000 RM 200,000 Cash expenses 50,000 40,000 60,000 Depreciation 90,000 90,000 90,000 Earnings before taxes 80,000 60,000 50,000 Taxes @ 30% 24,000 18,000 15,000 Operating income after taxes 56,000 42,000 35,000

Columbia Comp. invests RM 270,000 in a project that is depreciated on a straight-line basis over three years to zero disposal value. The relevant details for the project over its 3-year life are shown below. 2 Calculate the accounting rate of return for the project. Year 1 Year 2 Year 3 Sales RM 220,000 RM 190,000 RM 200,000 Cash expenses 50,000 40,000 60,000 Depreciation 90,000 90,000 90,000 Earnings before taxes 80,000 60,000 50,000 Taxes @ 30% 24,000 18,000 15,000 Operating income after taxes 56,000 42,000 35,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 15P

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Consider the following financial data for an investment project:• Required capital investment al n = 0: $ 100,000• Project service life: I 0 yea rs• Salvage value at N = I 0: $15,000• Annual revenue: $150.000• Annual O&M costs (not including depreciation): $50.000• Depreciation method for tax purpose: seven-year MACRS• Income tax rate: 40%.Determine the project cash flow at the end of year lO.(a) $69.000(b) $73.000(c) $66.000(d) $67.000
Windsor Company is considering two capital expenditures. Relevant data for the projects are as follows: Project Initial investment Annual cash inflow Life of project Salvage value A $202,003 $41,080 6 years $0 B $306,910 $49,130 9 years $0 Windsor Company uses the straight-line method to depreciate its assets. Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the facto provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.)
Consider the financial data for a project given in the table below. Initial investment Project life Salvage value Annual revenue $70,000 6 years $10,000 $26,000 Annual expenses $7,000 (a) What is i for this project? 18.1 % (Round to one decimal place.) (b) If the annual expense increases at a 7% rate over the previous year's expenses, but the annual income is unchanged, what is the new / - 16 % (Round to one decimal place.) (c) In part (b), at what annual rate will the annual income have to increase to maintain the same i obtained in part (a)? The annual income has to increase at% per year (Round to one decimal place.)
Calculate the NPV of Project A using the below information: Project period: 5 Years Amount paid for research: $10,500 Cost of equipment: $150,000 (Depreciation method: Straight line for 5 years) Annual savings from this project A: $55,500 Cost of Capital: 12% Tax rate: 38% a. $4,634.80 b. -$25,959.65 C. $15,134.80 d. -$36,459.65 U: 0.0 kB/s D: 0.3kBls rch DELL
Bridgeport Company is considering two capital expenditures. Relevant data for the projects are as follows: Project Initial investment Annual cash inflow Life of project Salvage value A $260,084 $46,590 Project A 7 years $0 Project B Click here to view the factor table. Bridgeport Company uses the straight-line method to depreciate its assets. B $278,237 Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.) $44,540 9 years $0 Internal rate of return % %
Consider the following financial data for an investment project:• Required capital investment at n = 0: $ 100,000• Project service life: 10 years• Salvage value at n = 10: $15,000• Annual revenue: $150.000• Annual O&M costs (not including depreciation): $50.000• Depreciation method for tax purpose: seven-year MACRS• In come tax rate: 40%.Determine the project cash flow at the end of year 10.(a) $69.000(b) $73.000(c) $66.000(d) $67.000
A company is considering a 3-year project with a projected net income of sh. 4M, 6M,5M in year 1, year 2 and year 3 respectively. The initial investment is sh. 40M and the salvage value is sh.2M.The company applies the straight line method for depreciating its assets, what is the Accounting Rate of Return? Assume a tax rate of 30% Select one: A. 26.3% B. 23.8% C.25% D. None of the above
A company is considering investing in one of two projects for a period of three years. Information relating to both projects is shown below. Project A (000) Project B (000) Initial cost 390 690 Accounting Net Profit (this profit includes depreciation) Year 1 120 200 Year 2 230 320 Year 3 160 320 Residual Value at the end of 3 years 150 240 All assets are depreciated on a straight-line basis. The company’s cost of capital is 20% per annum. The following discount table is provided. Periods 8% 10% 12% 15% 20% 25% 1 0.926 0.909 0.893 0.870 0.833 0.8000 2 0.857 0.826 0.797 0.756 0.694 0.6400 3 0.794 0.751 0.712 0.658 0.579 0.5120 4 0.735 0.683 0.636 0.572 0.482 0.4096 5 0.681 0.621 0.567 0.497 0.402 0.3277 Required: (a) Calculate annual cashflow for Project A and Project B. (b) Where applicable, using annual cashflow in (a) for…
CC Company invested in a project which required an investment of P10,000 with a salvage value of P1,000 at the end of its 3 year life. The annual net income after income taxes are as follows: Year 1 P3,000 2 4,800 3 7,200 What is the payback period? Group of answer choices 1.897 yrs 1.513 yrs 1.487 yrs 1.385 yrs
The following data concern an investment project (Ignore income taxes.): Investment in equipment Annual net cash inflows $ 215,000 $ 56,000 $ 70,700 $ 27,000 Salvage value of the equipment Working capital required Life of the project Required rate of return 5 years Net present value 12% The working capital will be released for use elsewhere at the conclusion of the project. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Required: Compute the project's net present value. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount.
A project capitalized for P 2,850,000 invested in depreciable asset will earn a uniform annual revenue of P 1,650,000 for 10 years. The costs for operation and maintenance total P 725,000 a year, and taxes and insurance will cost 3% of the first cost each year. The company expects its capital to earn 14% before income taxes. *** Type the letter of the correct answer. • Using PW method 1. PWIN is: a) P 6,454,943.11 2. PWOUT is: a) P 5,308,246.30 3. PWNET is: a) P 1,681,821.99 b) P 9,467,249.90 b) P 7,077,661.73 b) P 1,528,929.09 • Using Payback Period method 4. What is the payback period? a) 3.39 years b) 1.13 years c) P 5,163,954.49 c) P 7,785,427.90 c) P 1,146,696.81 c) 2.55 years d) P 8,606,590.82 d) P 4,246,597.04 d) P 917,357.45 d) 1.70 years
The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project Z Amount of investment $64,000 $84,000 Useful life 4 years 9 years Estimated residual value 0 0 Estimated total income over the useful life $8,960 $43,470 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A % Project Z %

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bartleby, a Learneo, Inc. business

	Year 1	Year 2	Year 3
Sales	RM 220,000	RM 190,000	RM 200,000
Cash expenses	50,000	40,000	60,000
Depreciation	90,000	90,000	90,000
Earnings before taxes	80,000	60,000	50,000
Taxes @ 30%	24,000	18,000	15,000
Operating income after taxes	56,000	42,000	35,000