Question

Memphis Co. is going to purchase a machine for $83,200 that will increase cash flows by $50,000 in the first year, $30,000 the second year, and $25,000 the third year. The machine will have no residual value. The minimum rate of return is 10 percent. The present value factors for the three years are 0.909, 0.826, and 0.751, respectively. The machine's actual rate of return is A. 10 percent B. Unable to determine from the data given C. greater than 10 percent. D. less than 10 percent

Answer #1

Quip Corporation wants to purchase a new machine for $300,000.
Management predicts that the machine will produce sales of $182,000
each year for the next 5 years. Expenses are expected to include
direct materials, direct labor, and factory overhead (excluding
depreciation) totaling $78,000 per year. The firm uses
straight-line depreciation with an assumed residual (salvage) value
of $50,000. Quip's combined income tax rate, t, is
20%.
Management requires a minimum of 10% return on all investments.
What is the approximate...

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 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...

. XL Co. owns a machine purchased a machine 4 years ago
for OMR 80,000. The accumulated depreciation on the machine to date
is OMR 32,000. Depreciation rate is 10% per annum straight line
method. XL Co. can sell the machine to another manufacturer for OMR
50,000. In order to make the sale, XL Co. must incur a
transportation cost of OMR 2000. If XL Co. replaces the machine
with a new version, it would cost OMR120,000. The cash flows...

TopCap Co. is evaluating the purchase of another sewing machine
that will be used to manufacture sport caps. The invoice price of
the machine is $122,500. In addition, delivery and installation
costs will total $4,000. The machine has the capacity to produce
12,000 dozen caps per year. Sales are forecast to increase
gradually, and production volumes for each of the five years of the
machine's life are expected to be as follows: Use Table 6-4.
(Use appropriate factor(s) from the...

TopCap Co. is evaluating the purchase of another sewing machine
that will be used to manufacture sport caps. The invoice price of
the machine is $121,500. In addition, delivery and installation
costs will total $4,500. The machine has the capacity to produce
12,000 dozen caps per year. Sales are forecast to increase
gradually, and production volumes for each of the five years of the
machine's life are expected to be as follows: Use Table 6-4.
(Use appropriate factor(s) from the...

The following data are accumulated by Geddes Company in
evaluating the purchase of $109,100 of equipment, having a
four-year useful life:
Net Income
Net Cash Flow
Year 1
$30,000
$51,000
Year 2
18,000
39,000
Year 3
9,000
30,000
Year 4
(1,000)
20,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5...

The Pan American Bottling Co. is considering the purchase of a
new machine that would increase the speed of bottling and save
money. The net cost of this machine is $66,000. The annual cash
flows have the following projections. Use Appendix B and Appendix D
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Year
Cash Flow
1
$
28,000
2
28,000
3
28,000
4
33,000
5
11,000
a. If the...

Chicago Co. is interested in purchasing a machine that would
improve its operational efficiency. The cost is $200,000 with an
estimated residual value of $20,000 and a useful life of eight
years. Cash inflows are expected to increase by $40,000 a year. The
company's minimum rate of return is 10 percent. The present value
of a single sum is 0.467, and the present value for a stream of
payments that are the same amount each year is 5.335. What is...

The following data are accumulated by Paxton Company in
evaluating the purchase of $142,800 of equipment, having a
four-year useful life:
Net Income
Net Cash Flow
Year 1
$41,000
$70,000
Year 2
25,000
54,000
Year 3
12,000
41,000
Year 4
(1,000)
27,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5...

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