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Exercise 24-1 Payback period computation; uneven cash flows LO P1 Beyer Company is considering the purchase of an asset for $300,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $76,000 $45,000 $75,000 $260,000 $16,000 $472,000 Compute the payback period for this investment. (Cumulative net cash outflows must he entered with a minus sign. Round your Payback Period answer to 2 decimal place.) Payback period =| I Exercise 24-2 Net present value LO P3 Beyer Company is considering the purchase of an asset for $200,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 12% return on its investments. (PV of $_1, FV of $_1, PVA of $1, and FVA of $_1) (Use appropriate factorts) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $69,000 $52,000 $73,000 $149,000 $55,000 $398,000 a. Compute the net present value of this investment. b. Should Beyer accept the investment? Complete this question by entering your answers In the tabs below. Required A -Required B Compute the net present value of this investment. (Round your answers to the nearest whole dollar.) _!__ Net present value _ Exercise 24-2 Net present value L0 P3 Beyer Company is considering the purchase of an asset for $200,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 12% return on its investments. (PV of $_1, FV of $_1, PVA of $1, and PVA of $_1) (Use appropriate factorts) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $69,000 $52,000 $73,000 $149,000 $55,000 $398,000 a. Compute the net present value of this investment. b. Should Beyer accept the investment? Complete thls question by entering your answers In the tabs below. Required A Required B Should Beyer accept the investment? Should Beyer accept the investment? _ Exercise 24-5 Payback period computation; even cash flows LO P1 Compute the payback period for each of these two separate investments: a. A new operating system for an existing machine is expected to cost $260,000 and have a useful life of four years. The system yields an incremental after-tax income of $75,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. I). A machine costs $190,000, has a $14,000 salvage value, is expected to last nine years, and will generate an after-tax income of $41,000 per year after straight-line depreciation. Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $633,000 and have a useful life of six years. The system yields an incremental aftertax income of $185,000 each year after deducting its straightline depreciation. The predicted salvage value of the system is $45,000. b. A machine costs $450,000, has a $34,000 salvage value, is expected to last eight years, and will generate an after-tax income of $95,000 per year after straight-line depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided.) Complete this question by entering your answers In the tabs below. Required A Required B A new operating system for an existing machine is expected to cost $633,000 and have a useful life of six years. The system yields an incremental after-tax income of $185,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $45,000. (Round your answers to the nearest whole dollar.) Residual value Required B > Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $633,000 and have a useful life of six years. The system yields an incremental aftertax income of $185,000 each year after deducting its straightline depreciation. The predicted salvage value of the system is $45,000. b. A machine costs $450,000, has a $34,000 salvage value, is expected to last eight years, and will generate an after-tax income of $95,000 per year after straightline depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided.) Complete this question by enterlng your answers In the tabs below. Required A Required B A machine costs $450,000, has a $34,000 salvage value, is expected to last eight years, and will generate an after-tax income of $95,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.) Annuaucasnnow l-H_ Residuawanue l-= Net present value B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $144,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 57,600 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $ 90, 000 Costs Materials, labor, and overhead (except depreciation on new equipment) 48 , 000 Depreciation on new equipment 12, 000 Selling and administrative expenses 9 , 000 Total costs and expenses 69, 000 Pretax income 21, 000 Income taxes (20%) 4, 200 Net income $ 16,800 1. Compute the payback period. 2. Compute the accounting rate of return for this equipment. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the accounting rate of return for this equipment. Accounting Rate of Return Choose Numerator: 1 Choose Denominator: = Accounting Rate of Return = Accounting rate of return Exercise 24-10 NPV and protability index LO P3 Following is information on two alternative investments being considered by Jolee Company. The company requires a 8% return from its investments. (PV of $1, FV of $1, PVA of $_1, and FVA of $_1) (Use appropriate factor(s) from the tables provided.) Project A Project B Initial investment $(18@,325) $(15,963) Expected net cash flows in: Year 1 43.9% 34.033 Year 2 54,3 58,666 Year 3 31,295 62,633 Year 4 92.4% 75.033 Year 5 65,@%@ 33,033 a. For each alternative project compute the net present value. b. For each alternative project compute the protability index. If the company can only select one project, which should it choose? Complete this question by entering your answers in the tabs below. JUl For each alternative project compute the net present value. Initial Investment 5 130.325 ' Complete this question by entering your answers In the tabs below. Required A Required B For each alternative project compute the protability index. If the company can only select one project, which should it choose? If the company can only select one project, which should it choose? ( Required A Phoenix Company can invest in each of three cheesemaking projects: C1, C2, and C3. Each project requires an initial investment of $288,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and PVA of $_1) (Use appropriate factor(s) from the tables provided.) c1 c2 c3 Year 1 $ 32,000 $116,000 $200,000 Year 2 123,000 116,000 30,000 Year 3 133,000 116,000 63,000 Totals $343, 000 $348 , 000 $343, 000 1. Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. 2. Using the answer from part 1, is the internal rate of return higher or lower than 9% for Project C2? Complete this questlon by enterlng your answers In the tabs below. ReqUimd 1 Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project C1 Initial Investment Chart Values are Based on: i= % Cash PV Year Present Inflow X Factor Value 1 = 2 Project C2 Initial Investment Cash PV Year Present Inflow X Factor Value 2 3 Project C3 Initial Investment PV Year Cash Present Inflow X Factor Value 2Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using the answer from part 1, is the internal rate of return higher or lower than 9% for Project C2? Is the internal rate of return higher or lower than 9% for Project C2? Exercise 24-15 NPV and IRR for automation investment LO P3, P4 OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $3.9 million has a 20year life, and will have zero salvage value. If the system is implemented, the company will save $520,000 per year in direct labor costs. The company requires a 9% return from its investments. 1. Compute the proposed investment's net present value. 2. Using your answer from part1, is the investment's internal rate of return higher or lower than 9%? Complete this question by entering your answers In the tabs below. Required 1 Required 2 Compute the proposed investment's net present value. Required 2 ) Exercise 24-15 NPV and IRR for automation investment LO P3, P4 OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $3.9 million, has a 20year life, and will have zero salvage value. If the system is implemented, the company will save $520,000 per year in direct labor costs. The company requires a 9% return from its investments. 1. Compute the proposed investment's net present value. 2. Using your answer from part 1, is the investment's internal rate of return higher or lower than 9%? Complete this question by entering your answers In the tabs below. ReqUirEd 2 Using your answer from part 1, is the investment's internal rate of return higher or lower than 9%? Is the investment's internal rate of return higher or lower than 9%? l l