?? أبجد هوزأبجد هوز- AaAA1.- Palatinillssle 1X,abeblaiفقرة11106.7.5 11Q2 Martin Production Co. is considering investing in specialized equipment costing $975,000. Theequipment has a useful life of five years and a residual value of $75,000. Depreciation is calculatedusing the straight-line method. The expected net cash inflows from the investment are given below:$275,000220,000Year 1Year 2200,000200,000180,000Year 3Year 4Year 5$1,075,000I.Compute the accounting rate of return on the investment, Showyourcalculations.

Accounting rate of return can be computed using the following formula : ARR=Average net…

equipment has a useful life of five years and a residual value of $75,000. Depreciati using the straight-line method. The expected net cash inflows from the investment Year 1 $275,000 Year 2 220,000 200,000 200,000 180,000 $1,075,000 Year 3 Year 4 Year 5 Compute the accounting rate of return on the investment, Show your calculations.

equipment has a useful life of five years and a residual value of $75,000. Depreciati using the straight-line method. The expected net cash inflows from the investment Year 1 $275,000 Year 2 220,000 200,000 200,000 180,000 $1,075,000 Year 3 Year 4 Year 5 Compute the accounting rate of return on the investment, Show your calculations.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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What is the accounting rate of return for Project B? (Round your answer to two decimal places. Martin Production Co. is considering investing in specialized equipment costing $975,000. The equipment has a useful life of five years and a residual value of $75,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below: Year 1 $275,000 Year 2 220,000 Year 3 200,000 Year 4 200,000 Year 5 180,000 $1.075.000 Compute the accounting rate of return on the investment, Show your calculations.
Tucker Manufacturing is considering investing in specialized equipment costing $844,000. The equipment has a useful life of five years and a residual value of $74,000. Depreciation is calculated using the straight−line method. The expected net cash inflows from the investment are given below: Year 1 $311,000 2 352,000 3 363,000 4 190,000 5 237,000 Total $1,453,000 What is the average amount invested? A. $459,000 B. $726,500 C. $422,000 D. $385,000
Question 2) Dartis Company is considering investing in a specialized equipment costing $800,000. The equipment has a useful life of 5 years and a residual value of $55,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below. Year 1 $200,000 2 150,000 3 260,000 4 95,000 5 95,000 What is the accounting rate of return on the investment?
Q1 A company is evaluating three possible investments. Each uses the straight-line method of depreciation. Following information is provided by the company: Q2 Martin Production Co. is considering investing in specialized equipment costing $975,000. The equipment has a useful life of five years and a residual value of $75,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below:
Oriental Corporation has gathered the following data on a proposed investment project: Investment in depreciable equipment $ 450,000 $ 90,000 Annual net cash flows Life of the equipment 10 years Salvage value Discount rate 53 $ 0 7% The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment would be: (Round your answer to 1 decimal place.) Multiple Choice 0.2 years < Prev 5 of 5 Lavext a nere to search acer 立

What is the answer in the following question and it's cash flow diagram? a.) The purchased price of the equipment is P12,000 and its estimated maintenance costs are P500 for the first year, P1,500 for the second year, and P2,500 for the third year. After three years of use the equipment is replaced, it has no salvage value. Compute the present equivalent cost of the equipment using 10% interest. (capitalized cost)
4. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $2,400,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net operating working…
Omega Limited intends purchasing a new machine and has a choice between the following two machine: Machine ABC: The cost of this machine is R200 000 with an expected economic life of 5 years and a residual value of R20 000. Depreciation is calculated on the straight-line method. The expected new cash flows are as follows: Year 1 R68 000 Year 2 R54 000 Year 3 R64 000 Year 4 R60 000 Year 5 R52 000 Machine XYZ: The cost of machine XYZ is R220 000. It has an expected economic life of 5 years with no residual value. Depreciation is calculated on the straight-line method. The expected new cash flows are R66 000 per annum every year for the 5-year period. Omega Limited estimates that its cost of capital is 14%. Required: 2.1 Calculate the payback period for machine XYZ (answers must be expressed years, months and days) 2.2 Calculate the accounting rate of return for Machine ABC 2.3 Explain two advantages of using the accounting rate of return in capital…
A potential project involves an initial investment in machinery of RO.1,000,000 and has the following cash inflows:Year 1 – RO.250,000Year 2 – RO.350,000Year 3 – RO.200,000Year 4 – RO.400,000At the end of year 4, the machinery will be sold for RO.600,000.Calculate the accounting rate of return based on average investment.NOTE (DEDUCT THE DEPRECIATION TO ARRIVE AT THE CORRECT AVERAGE PROFIT) a. None of the options b. 35% c. 20% d. 25% Clear my choice
Accounting Rate of Return Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Cobre Company is considering the purchase of new equipment that will speed up the process for extracting copper. The equipment will cost $4,100,000 and have a life of 5 years with no expected salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses 1 $6,000,000 $4,800,000 2 6,000,000 4,800,000 3 6,000,000 4,800,000 4 6,000,000 4,800,000 5 6,000,000 4,800,000 Emily Hansen is considering investing in one of the following two projects. Either project will require an investment of $75,000. The expected cash revenues minus cash expenses for the two projects follow. Assume each project is depreciable. Year Project A Project B 1 $22,500 $22,500 2 30,000 30,000 3 45,000 45,000 4 75,000 22,500 5 75,000 22,500 Suppose that a…
Longmont Corporation is considering the purchase of a machine costing $44,000 with a 5-year useful life and no salvage value. Longmont uses straight- line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Longmont's average investment? Multiple Choice $26,400. $44,000. O $10,560. $8,800. $22,000.
Tucker Manufacturing is considering investing in specialized equipment costing $841,000. The equipment has a useful life of five years and a residual value of $80,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below. Year 1 2 3 4 5 $315,000 356,000 368,000 196,000 237,000 $1,472,000 Total What is the average annual operating income from the asset? A. $294,400 OB. $142,200 OC. $126,200 OD. $110,200

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