Question

Ramson Corporation is considering purchasing a machine that would cost $283,850 and have a useful life...

Ramson Corporation is considering purchasing a machine that would cost $283,850 and have a useful life of 5 years. The machine would reduce cash operating costs by $81,100 per year. The machine would have a salvage value of $107,100 at the end of the project. (Ignore income taxes.)

Required:

a. Compute the payback period for the machine. (Round your answer to 2 decimal places.)

b. Compute the simple rate of return for the machine. (Round your intermediate calculations to the nearest whole dollar and your final answer to 2 decimal places.)

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
1) payback period
initial investment/annual net cash flow
283,850/81100
3.5 years
2) simple rate of return
Annual incremental net operating income/initial investment
45,750/283850
16.12%
Annual incremental cost savings 81,100
annual depreciation (283850-107100)/5= 35350
Annual incremental net operating income 45,750
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
Ramson Corporation is considering purchasing a machine that would cost $454,140 and have a useful life...
Ramson Corporation is considering purchasing a machine that would cost $454,140 and have a useful life of 8 years. The machine would reduce cash operating costs by $84,100 per year. The machine would have a salvage value of $107,130 at the end of the project. (Ignore income taxes.) Required: a. Compute the payback period for the machine. (Round your answer to 2 decimal places.) b. Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest...
30. Ramson Corporation is considering purchasing a machine that would cost $633,080 and have a useful...
30. Ramson Corporation is considering purchasing a machine that would cost $633,080 and have a useful life of 9 years. The machine would reduce cash operating costs by $93,100 per year. The machine would have a salvage value of $107,220 at the end of the project. (Ignore income taxes.) Required: a. Compute the payback period for the machine. (Round your answer to 2 decimal places.) b. Compute the simple rate of return for the machine. (Round your intermediary answers to...
Jark Corporation has invested in a machine that cost $66,000, that has a useful life of...
Jark Corporation has invested in a machine that cost $66,000, that has a useful life of twelve years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of five years. Given these data, the simple rate of return on the machine is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.) Garrison 16e...
Jark Corporation has invested in a machine that cost $75,000, that has a useful life of...
Jark Corporation has invested in a machine that cost $75,000, that has a useful life of four years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of two years. Given these data, the simple rate of return on the machine is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.) Garrison 16e...
Ursus, Inc., is considering a project that would have a five-year life and would require a...
Ursus, Inc., is considering a project that would have a five-year life and would require a $1,650,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.):    Sales $ 2,600,000 Variable expenses 1,650,000 Contribution margin 950,000 Fixed expenses: Fixed out-of-pocket cash expenses $ 400,000 Depreciation 330,000 730,000 Net operating income $ 220,000 All of...
The management of Penfold Corporation is considering the purchase of a machine that would cost $300,000,...
The management of Penfold Corporation is considering the purchase of a machine that would cost $300,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $70,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is...
Ursus, Inc., is considering a project that would have a five-year life and would require a...
Ursus, Inc., is considering a project that would have a five-year life and would require a $775,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales $ 1,900,000 Variable expenses 1,300,000 Contribution margin 600,000 Fixed expenses: Fixed out-of-pocket cash expenses $ 350,000 Depreciation 155,000 505,000 Net operating income $ 95,000 Click here to...
Ursus, Inc., is considering a project that would have a eleven-year life and would require a...
Ursus, Inc., is considering a project that would have a eleven-year life and would require a $1,848,000 investment in equipment. At the end of eleven years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales $ 2,100,000 Variable expenses 1,400,000 Contribution margin 700,000 Fixed expenses: Fixed out-of-pocket cash expenses $ 370,000 Depreciation 168,000 538,000 Net operating income $ 162,000 Click here to...
Ursus, Inc., is considering a project that would have a ten-year life and would require a...
Ursus, Inc., is considering a project that would have a ten-year life and would require a $2,552,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales $ 2,400,000 Variable expenses 1,550,000 Contribution margin 850,000 Fixed expenses: Fixed out-of-pocket cash expenses $ 270,000 Depreciation 255,200 525,200 Net operating income $ 324,800 Click here to...
HI Corporation is considering the purchase of a machine that promises to reduce operating costs by...
HI Corporation is considering the purchase of a machine that promises to reduce operating costs by the same amount for every year of its 7-year useful life. The machine will cost $213,980 and has no salvage value. The machine has a 14% internal rate of return. (Ignore income taxes.) Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using the tables provided. What are the annual cost savings promised by the machine? (Round your...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT