Question

You own an ice rink and are considering investing in a new high speed Zamboni (ice...

You own an ice rink and are considering investing in a new high speed Zamboni (ice resurfacing machine). This would require an investment of $36,000 (the cost!). You are projecting that with the new Zamboni, additional related annual net cash inflows (with more available ice time for hockey leagues, skating parties, etc.) would be $8,000 annually. The Zamboni is expected to have a 6 year useful life with no salvage/residual value. (Percentage is 10%)

A. What is the expected simple (accounting) rate of return

B. What is the expected payback period?

C. What is the expected Net Present Value at your desired discount rate(10%)

D.What is the expected internal rate of return?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Thank you.

For any clarification please comment

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm is considering investing in a project that requires an initial investment of $200,000 and...
A firm is considering investing in a project that requires an initial investment of $200,000 and is expected to produce cash inflows of $60,000, $80,000, and $100,000 in first, second, and third years. There will be no residual value. The firm applies a discount rate of 10%. Discount factors for Year 1, 2 and 3 are 0.909, 0.826, and 0.751 respectively. Required: i) Calculate the NPV of the project. ii) Explain the meaning of NPV and its advantages as an...
A firm is considering investing in a project that requires an initial investment of $200,000 and...
A firm is considering investing in a project that requires an initial investment of $200,000 and is expected to produce cash inflows of $60,000, $80,000, and $100,000 in first, second, and third years. There will be no residual value. The firm applies a discount rate of 10%. Discount factors for Year 1, 2 and 3 are 0.909, 0.826, and 0.751 respectively. Required: i) Calculate the NPV of the project. ii) Explain the meaning of NPV and its advantages as an...
Jolly Company is considering investing $ 33,000 in a new machine. The machine is expected to...
Jolly Company is considering investing $ 33,000 in a new machine. The machine is expected to last five years and to have a salvage value of $ 8,000. The straight-line method of depreciation is used. Annual after-tax net cash inflow from the machine is expected to be $ 7,500. Calculate the annual depreciation, after-tax net income, average investment, and accounting or unadjusted rate of return.  
Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would...
Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 4 years. Option B would require no rebuilding expenditure, but its maintenance costs would be higher. Since the Option B machine is of initial higher quality, it is expected to have a salvage value at the end of its useful life. The following estimates were made of the cash flows....
Question: A corp is considering modernizing its production facility by investing in new equipment and selling...
Question: A corp is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment. Old Equipment New Equipment Cost $80,800 Cost $38,560 Accumulated depreciation $40,400 Estimated useful life 8 years Remaining life 8 years Salvage value in 8 years $4,592 Current salvage value $10,600 Annual cash operating costs $29,600 Salvage value in 8 years $0 Annual cash operating costs $36,000 Depreciation is $10,100 per year for...
Yappy Company is considering a capital investment of $320,000 in additional equipment. The new equipment is...
Yappy Company is considering a capital investment of $320,000 in additional equipment. The new equipment is expected to have a useful life of 8 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income is expected to be 25,000 and cash inflows are expected to be $65,000. Yappy requires a 10% return on all new investments. Instructions: Using each of the methods below, show ALL your work for calculating...
Sturgis Medical Clinic (SMC) in Sturgis, SD is considering investing in new medical imaging equipment that...
Sturgis Medical Clinic (SMC) in Sturgis, SD is considering investing in new medical imaging equipment that would increase its capacity to provide added services to treat patients. The machine will have a 5 year expected life. The projected annual cash flows related to this investment are as follows: Investment in new medical equipment $ 450,000 Shipping cost for new equipment $ 20,000 Installation of new medical equipment 25,000 Travel and training for staff 65,000 Added customer accounts receivable fully Recovered...
12. The Danforth Tire Company is considering the purchase of a new machine that would increase...
12. The Danforth Tire Company is considering the purchase of a new machine that would increase the speed of manufacturing and save money. The net cost of this machine is $66,000. The annual cash flows have the following projections. Year Cash Flow 1 $21,000 2 $29,000 3 $36,000 4 $16,000 5 $8,000 a. If the cost of capital is 10 percent, what is the net present value? b. What is the internal rate of return (IRR) c. Should the project...
Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would...
Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 4 years. Option B would require no rebuilding expenditure, but its maintenance costs would be higher. Since the Option B machine is of initial higher quality, it is expected to have a salvage value at the end of its useful life. The following estimates were made of the cash flows....
Question # 1 Toronto Company is considering two new machines that should produce considerable cost savings...
Question # 1 Toronto Company is considering two new machines that should produce considerable cost savings in its assembly operations. The cost of each machine is $20,000 and neither is expected to have a salvage value at the end of a 4-year useful life. The required rate of return of the company is 10% and the company prefers that a project return its initial outlay within the first half of the project’s life. The annual after-tax cash savings for each...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT