Question

A company can buy a machine that is expected to have a three-year life and a...

A company can buy a machine that is expected to have a three-year life and a $34,000 salvage value. The machine will cost $1,816,000 and is expected to produce a $204,000 after-tax net income to be received at the end of each year. If a table of present values of $1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%? Multiple Choice $124,918 $592,218 $636,166 $712,534 Incorrect $1,940,918

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
After-tax net income 204000
Add:Depreciation expense 594000 =(1816000-34000)/3
Annual net cash flows 798000
Year 0 Year 1 Year 2 Year 3
Investment cost -1816000
Annual net cash flows 798000 798000 798000
Salvage value 34000
Total cash flows -1816000 798000 798000 832000
X PV factor 1 0.8929 0.7972 0.7118
Present value of Total cash flows -1816000 712534 636166 592218
Net present value 124918
$124,918 is correct option
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 company can buy a machine that is expected to have a three-year life and a...
A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. If a table of present values of $1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from...
A company can buy a machine that is expected to have a three-year life and a...
A company can buy a machine that is expected to have a three-year life and a $40,000 salvage value. The machine will cost $1,840,000 and is expected to produce a $210,000 after-tax net income to be received at the end of each year. If a table of present values of 1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from...
can buy a machine that is expected to have a three-year life and a $30,000 salvage...
can buy a machine that is expected to have a three-year life and a $30,000 salvage value. It will be depreciated using the straight-line method. The machine will cost $2,100,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. The company requires a 12% rate of return on its investments. a, What is the payback period? B accounting rate of return? c Net present value?
can buy a machine that is expected to have a three-year life and a $30,000 salvage...
can buy a machine that is expected to have a three-year life and a $30,000 salvage value. It will be depreciated using the straight-line method. The machine will cost $2,100,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. The company requires a 12% rate of return on its investments. What is the payback period?
A company is deciding whether to buy a machine. The machine costs GH¢28,000 and is expected...
A company is deciding whether to buy a machine. The machine costs GH¢28,000 and is expected to generate a net cash flow of GH¢10,000 each year during a productive life of 3 years. If the cost of capital is 12%: (a) Draw up a discounted cash flow table and hence calculate the Net Present Value of the machine. (b) Advice the company in the light of the situation.
Carmel Corporation is considering the purchase of a machine costing $37,000 with a 5-year useful life...
Carmel Corporation is considering the purchase of a machine costing $37,000 with a 5-year useful life and no salvage value. Carmel 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 Carmel's average investment? Multiple Choice $18,500. $22,200. $7,400. $37,000. $8,880. The following relates to a proposed equipment purchase: Cost $ 153,000 Salvage value $ 3,000 Estimated useful life 4 years...
Q 12.44: JT Engineering wants to buy a machine that costs $360,000, has an 8-year life,...
Q 12.44: JT Engineering wants to buy a machine that costs $360,000, has an 8-year life, and has a $12,000 salvage value. Annual inflows are $120,000 and annual outflows are $86,000 (including depreciation). What is the annual rate of return on this purchase? A : 18.28% B : 18.88% C : 22.86% D : 28.33% Q 12.43: Clarendon Co. is considering purchasing new equipment with a 6-year useful life. The equipment will cost $309,120 and have annual depreciation expense of...
Carter company’s machine costs $20,000 and is expected to have a 10-year life. It will depreciate...
Carter company’s machine costs $20,000 and is expected to have a 10-year life. It will depreciate straight-line over a 10-year life to a zero salvage value and it is expected to reduce the firm’s cash operating costs by $3,000 per year. If the firm is in the 50 percent marginal tax bracket, what estimated Year 1–n net cash flows will the machine generate?
G Wagon would like to purchase a printing machine for $315,000. The machine is expected to...
G Wagon would like to purchase a printing machine for $315,000. The machine is expected to have a life of three years and a salvage value of $30,000. Annual maintenance costs will total $16,000. Annual cash savings are predicted to be $125,000. G Wagon required rate of return is 12%.   What is the net cash inflow or outflow resulting from this investment opportunity? Using Excel, compute the net present value (NPV) What is the NPV that you calculated?
Your Company purchased a machine with an estimated useful life of 8 years. The machine will...
Your Company purchased a machine with an estimated useful life of 8 years. The machine will generate cash inflows of $96,000 each year. The salvage value at the end of the project is $80,000. Your Company's discount rate is 6%. The net present value of the investment is ($7,500). What is the purchase price of the machine?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT