), Exercise 26-11 BAP Corporation is reviewing an investment proposal. c. Retained earnings. Year 0 ($400,000) initial investment Year 1 $140,000 Year 2 120,000 Year 3 100,000 Year 4 80,000, A company has a minimum required rate of return of 10%. 8 years b. a. Assume Peng requires a 5% return on its investments. The investment costs $48,000 and has an estimated $10,200 salvage value. Ignoring taxes, what is the most that the company would be willing to in, Strauss Corporation is making a $89,600 investment in equipment with a 5-year life.The company uses the straight-line method of depreciation and has a tax rate of 40 percent.The company's required rat, Strauss Corporation is making a $89,750 investment in equipment with a 5-year life.The company uses the straight-line method of depreciation and has a tax rate of 40 percent.The company's required rat, Strauss Corporation is making a $91,950 investment in equipment with a 5-year life. Explain. Assume Peng requires a 10% return on its investments. Assume Peng requires a 10% return on its investments, compute the net present value of this investment. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and, The Zinger Corporation is considering an investment that has the following data: Cash inflows occur evenly throughout the year. Talking on the telephon Negative amounts should be indicated by #12 The company is currently considering an investment that is expected to generate annual cash inflows of $10,000 for 6 years. Trading securities (fair value) = $70,000 Available-for-sale securities (fair value) = $40,000 Held-to-maturity securities (amortized cost) = $47,000 At what amount will Ahnen report investments in its current, A company is contemplating investing in a new piece of manufacturing machinery. The investment costs $45,000 and has an estimated $6,000 salvage value. Using the straight line method of depreciation, calculate accumul, Lucky Company Is considering a capital investment in machinery: Initial investment $1,400,000 Residual value $300,000 Expected annual net cash inflows $200,000 Expected useful life 10 years Required r, The following data concerns a proposed equipment purchase: Cost $161,100 Salvage value $4,900 Estimated useful life 4 years Annual net cash flows $47,000 Depreciation method Straight-line The annual average investment amount used to calculate the accounti, You have the following information on a potential investment: Capital investment $85,000 Estimated useful life 4 years Estimated salvage value $0 Estimated annual net cash inflows: Year 1 $18,000 Ye, The Seago Company is planning to purchase $524,500 of equipment with an estimated seven-year life and no estimated salvage value. 2. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. Peng Company is considering an investment expected to generate an average net income after taxes of $3,100 for three years. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. Assume Peng requires a 10% return on its investments. The annual depreciation cost is 10% of fixed capital investment. The investment costs $59,500 and has an estimated $9,300 salvage value. Required information Use the following information for the Quick Study below. Negative amounts should be indicated by a minus sign.) a. TABLE B.4 f= [(1 + i)"-1Vi Future Value of an Annuity of 1 Rate Periods 1% 2% 3% 6% 7% 8% 9% 10% 12% 15% 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 0000 .0000 1.0000 10000 2.0100 2.0200 2.0300 2.0400 2.0500 2.0600 2.0700 2.0800 2.0900 2.1000 2.1200 3.0301 3.0604 3.0909 3.1216 3.1525 3.1836 3.2149 3.2464 3.2781 3.3100 3.3744 4.0604 4.1216 4.1836 4.2465 4.3101 4.3746 4.4399 5.1010 5.2040 5.3091 5.4163 5.5256 5.6371 5.7507 5.8666 5.9847 6.1051 6.3528 6.1520 6.3081 6.4684 6.6330 6.8019 6.9753 7.1533 7.3359 7.5233 7.7156 8.1152 7.2135 7.4343 7.6625 7.8983 8.1420 8.3938 8.6540 8.9228 9.2004 9.4872 10.0890 8.2857 8.5830 8.8923 9.2142 9.5491 9.8975 10.2598 10.6366 11.0285 11.4359 12.2997 9.3685 9.7546 10.1591 10.5828 11.0266 11.4913 11.9780 12.4876 13.0210 13.5795 14.7757 1.0000 2.1500 3.4725 4.9934 6.7424 8.7537 11.0668 4.5061 4.5731 4.6410 4.7793 16.7858 10 10.4622 10.9497 11.4639 12.0061 12.5779 13.1808 13.8164 14.4866 15.1929 15.9374 17.5487 20.3037 11.5668 12.1687 12.8078 13.4864 14.2068 14.9716 15.7836 16.6455 7.5603 18.5312 20.6546 24.3493 12.6825 13.4121 14.1920 15.0258 15.9171 16.8699 17.8885 18.9771 20.1407 21.3843 24.1331 12 13 13.8093 14.6803 15.6178 16.6268 17.7130 18.8821 20.1406 21.4953 22.9534 24.5227 28.0291 14 14.9474 15.9739 17.0863 18.2919 19.5986 21.0151 22.5505 24.2149 26.0192 27.9750 32.3926 40.5047 15 16 17.2579 18.6393 20.1569 21.8245 23.6575 25.6725 27.8881 30.3243 33.0034 35.9497 42.7533 55.7175 17 18.4304 20.0121 21.7616 23.6975 25.8404 28.2129 30.8402 33.7502 36.9737 40.5447 48.8837 65.0751 18 19 20.8109 22.8406 25.1169 27.6712 30.5390 33.7600 37.3790 41.4463 46.0185 51.1591 63.4397 88.2118 20 22.0190 24.2974 26.8704 29.7781 33.0660 36.7856 40.9955 45.7620 51.1601 57.2750 72.0524 102.4436 25 30 35 41.6603 49.9945 60.4621 73.6522 90.3203 111.4348 138.2369 172.3168 215.7108 271.0244 431.6635 40 48.8864 60.4020 75.4013 95.0255 120.7998 154.7620 199.6351 259.0565 337.8824 442.5926 767.0914 1,779.0903 29.0017 34.3519 16.0969 7.2934 18.5989 20.0236 21.5786 23.2760 25.1290 27.1521 29.3609 31.7725 37.2797 47.5804 19.6147 21.4123 23.4144 25.6454 28.1324 30.9057 33.9990 37.4502 41.3013 45.5992 55.7497 75.8364 28.2432 32.0303 36.4593 41.6459 47.7271 54.8645 63.2490 73.1059 84.7009 98.3471 133.3339 212.7930 34.7849 40.5681 47.5754 56.0849 66.4388 79.0582 94.4608 113.2832 136.3075 164.4940 241.3327 434.7451 881.1702 Used to calculate the future value of a series of equal payments made at the end of each period. Using the original cost of the asset, what will be the unadjusted rat, A company can buy a machine that is expected to have a three-year life and a $31,000 salvage value. The amount to be invested is $100,000. (Round answer to 2 decimal places. The investment costs $48,600 and has an estimated $6,300 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $3,300 for three years. What is the present value, Strauss Corporation is making a $91,800 investment in equipment with a 5-year life. What is the present value, Strauss Corporation is making a $71,900 investment in equipment with a 5-year life. Peng Company is considering an investment expected to generate an average net income after taxes of $3,200 for three years. What, Tijuana Brass Instruments Company treats dividends as a residual decision. What is the average amount invested in a machine during its predicted five-year life if it costs $200,000 and has a $20,000 salvage value? Compute the net present value of this investment. The company has projected the following annual for the investment. Which option should the company choose to invest in? 51,000/2=25,500. It is considering investing in a project which costs $350,000 and is expected to generate cash inflows of $140,000 at the end of each year for three years. Compute this machine's accounti, On 1/1, a company buys equipment with a cost of $8,100, an estimated salvage value of $1,100, and an estimated useful life of 7 years. The lease term is five years. The excess cost over the book value of an investment that is due to expected above-average earnings is labeled on the consolidated balance sheet as: a. The company is expected to add $9,000 per year to the net income. You can specify conditions of storing and accessing cookies in your browser, Peng Company is considering an investment expected to generate an average net income after taxes of $2,600 for three years. What amount should Cullumber Company pay for this investment to earn a 12% return? , e following two costs of production, respectively: (1) the paper; and (2) the authors' one-time fees. 76,000 b. Question: Peng Company is considering an investment expected to generate an average net income after taxes of $3,500 for three years. What is the present valu, Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. What is the accounti, A company buys a machine for $70,000 that has an expected life of 6 years and no salvage value. Required information [The following information applies to the questions displayed below.] Assume Peng requires a 5% return on its investments. X Assume Peng requires a 15% return on its investments. Compute the net present value of this investment. distributed with a mean of 78 when mixing oil and water is the change in entropy positive or Required information [The folu.ving information applies to the questions displayed below.) All other trademarks and copyrights are the property of their respective owners. The corporate tax rate is 35 percent. Projected annual cash flows are: Year 1 $500,000 Year 2 $600,000 Year 3 $700,000 Year 4 $400,000 Calculate the NPV and the IRR. If the accounting ra, A company buys a machine for $76,000 that has an expected life of 7 years and no salvage value. Compute the net present value of this investment. What is the accounting rate of return? Estimate Longlife's cost of retained earnings. Assume Peng requires a 5% return on its investments. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. The company pays an operating tax rate of 30%. The The payback period, You are considering investing in a start up company. Compute the net present value of this investment. Each investment costs $1,000, and the firm's cost of capital is 10%. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. You would need to invest S2,784 today ($5,000 0.5568). The company is expected to add $9,000 per year to the net income. The salvage value is defined as the estimated book value of any asset after deducting all the depreciation on the asset. The amount, to be invested, is $100,000. Melton Company's required rate of return on capital budgeting projects is 16%. A new operating system for an existing machine is expected to cost $690,000 and have a useful life of six years. The present value of an annuity due for five years is 6.109. (before depreciation and tax) $90,000 Depreciation p.a. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. A company has three independent investment opportunities. Note: NPV is always a sensitive problem bec. 15900 Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. The company anticipates a yearly net income of $3,650 after taxes of 22%, with the cash flows to be received evenly throughout each year. value. c) Only applies to a business organized as corporations. Negative amounts should be indicated by a minus sign. Free and expert-verified textbook solutions. Peng Company is considering an investment expected to generate Management estimates that this machine will generate annual after-tax net income of $540. 1, A machine costs $180,000 and will have an eight-year life, a $20,000 salvage value, and straight-line depreciation is used. The estimated cash inflow from the project are as follows: Year Cash Inflow Present value factor at 10% 1 70,000 0.909 2 80,000 0.826 3 120,000 0.751 4 90,000 0.683 5 60,000 0.621 Ca, A company is considering investment in a Flexible Manufacturing System. The investment costs $45,600 and has an estimated $8,700 salvage value. Learn about what net present value is, how it is calculated both for a lump sum and for a stream of income over multiple years. The investment costs $58, 500 and has an estimated $7, 500 salvage value. Assume Peng requires a 5% return on its investments. If an asset costs $70,000 and is expected to have a $10,000 salvage value at the end of its ten-year life and generates annual net cash inflows of $10,000 each year, the cash payback period is _____. The estimated cash flow for the investment are as follows: N Description Cash flow ($) 0 price of the system Fo 1-4 revenue per, Joe Sixpack Inc. is considering an investment that will cost is $400,000. The fair value of the equipment is $464,000. What is the present value, Strauss Corporation is making a $87,550 investment in equipment with a 5-year life. a cost of $19,800. a. It expects to generate $2 million in net earnings after taxes in the coming year. Required information [The following information applies to the questions displayed below.) The Longlife Insurance Company has a beta of 0.8. Crispen normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 per. What method, A machine costs $400,000 and is expected to yield an after-tax net income of $9,000 each year. negative? Required information (The following information applies to the questions displayed below.) QS 24-8 Net present value LO P3 Assume Peng requires a 15% return on its investments. The investment costs $56,100 and has an estimated $7,500 salvage value. C. Appearing as a witness for a taxpayer The NPV is computed as: {eq}\displaystyle \text{Present value of annuity (PVA) } = P * \frac{1 - (1 + r)^{-t}}{r} {/eq}, Become a Study.com member to unlock this answer! The investment costs $48,600 and has an estimated $6,300 salvage value. Req, CPA corporation is considering an investment with a cost of $5,000,000 an estimate useful life of 5 years, and no salvage value. The investment costs $45,000 and has an estimated $6,000 salvage value. The net present value (NPV) is a capital budgeting tool. (Round answer to, During the year, Loon Corporation has the following transactions: $400,000 operating income; $325,000 operating expenses; $25,000 municipal bond interest; $60,000 long-term capital gain; and $95,000 short-term capital loss. Amount x PV Factor = Present Value Cash Flow Annual cash flow Select Chart Present Value of an Annuity of 1 II Residual value II Net present value. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000. The company's required rate of return is 11 percent. Compute the net present value of this investment. What is the NPV of the investment, The Zinger Corporation is considering an investment that has the following data: Year 1 Year 2 Year 3 Year 4 Year 5 Investment $8,000 $3,000 Cash inflow $2,000 $2,000 $5,000 $4,000 $4,000 Cash inflows occur evenly throughout the year. The net present value is given as the present value of inflows minus the present value of outflows from the project. Management estimates that this machine will generate annual after-tax net income of $540. Management predicts this machine has an 8-year service life and a $40,000 salvage value, and it uses straight-line depreciation. Cullumber Company is considering an investment that will return a lump sum of $942,800, 3 years from now. What is Ronis' Return on Investment for 2015? If a table of present v, Grouper Company owns equipment that cost $1,044,000 and has accumulated depreciation of $440,800. an average net income after taxes of $3,200 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Peng Company is considering an investment expected to generate an average net income after taxes of $3,500 for three years. The investment is expected to return the following cash flows, discounts at 8%. b. Assume Peng requires a 5% return on its investments. Presented below is the initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, an, Ahnen Company owns the following investments. This site is using cookies under cookie policy . ABC Company is adding a new product line that will require an investment of $1,500,000. a. Compute Loon s taxable inco. Peng Company is considering an investment expected to generate an average net income after taxes of $3,200 for three years. Compute the net present value of this investment. Accounting Rate of Return Choose Numerator: Choose Denominator: Accounting Rate of Return nnual after-tax net incomeAnnual average investentAccounting rate of return 3,500S 27,1501= 12.891 % The Controller asks you to use a depreciation method that would produce the highest charge against income after three years. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The company's required, Crispen Corporation can invest in a project that costs $400,000. Compute this machine's accoun, A machine costs $500,000 and is expected to yield an after-tax net income of $15,000 each year. Assume Peng requires a 5% return on its investments. This investment will produce certain services for a community such as vehicle kilometres, seat . Compute the net present value of this investment. The company uses the straight-line method of depreciation and has a tax rate of 40 per cent. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The investment costs $52,200 and has an estimated $9,000 salvage value. The company's desired rate of return used in the present value calculations was, A company is considering investment in a project that costs Rs. (Round each present value calculation to the nearest dollar. Multiple Choice, returns on investment is computed in the following manner. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income, Elmdale Company is considering an investment that will return a lump sum of $725,500, 6 years from now. b) define symbols and develop mathematical model, how does a change in each variable affect demand. Annual cash flow Compute the payback period. Select Chart Amount * PV Factor - Present Value Cash Flow Annual cash flow Residual value. 2.3 Reverse innovation. Find step-by-step Accounting solutions and your answer to the following textbook question: Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. During those years the company has been profitable, and it expects to continue to be profitable in the foreseeable future. Required: Prepare the, X Company is thinking about adding a new product line. The net cash flows are estimated to be $7,610 per year for the next 5 years and no salvage value is anticipated. The investment costs $57,600 and has an estimated $6,000 salvage value. The investment costs $45,000 and has an estimated $6,000 salvage value. For ex ample: What is the present value of $2,000 per year for 10 years assuming an annual interest rate of 9%. Capital investment - $100,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow Year 1 - $50,000 Year 2 - $47,000 Year 3 - $44,000 Required rate, You have the following information on a potential investment: Capital Investment - $100,000 Estimated useful life - 3 years Estimated salvage value - zero Estimated net cash inflow: Year 1 - $50,000 Y, Lt. Dan Corporation invested $90,000 in manufacturing equipment. The investment costs $45,000 and has an estimated $6,000 salvage value. The investment costs $51,900 and has an estimated $10,800 salvage value. The company uses straight-line depreciation. To find the NPV using a financial calacutor: 1. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years.

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