Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Adrian Sonnetson, the owner of Espresso Motors, is considering the addition of a paint and body shop to his automobile dealership. Construction of a building

image text in transcribed
image text in transcribed
Adrian Sonnetson, the owner of Espresso Motors, is considering the addition of a paint and body shop to his automobile dealership. Construction of a building and the purchase of necessary equipment is estimated to cost $810,400, and both the building and equipment will be depreciated over 10 years using the straight-line method. The building and equipment have zero estimated residual value at the end of 10 years. Sonnetson's required rate of return for this project is 12 percent. Net income related to each year of the investment is as follows: Revenue $657.700 Less: Material cost 70,600 151.100 Labor 81,040 10,000 Depreciation Other Income before taxes Taxes at 40% Net Income 344,960 137.984 $206,976 Click here to view factor tables Determine the net present value of the investment in the paint and body shop. (Round present value factor calculations to 4 decimal places, es 1.2151 and final answer to decimal place, es. 125. Enter negative amounts using either a negative sign preceding the number eg. 45 or parenthesese..(451 HE Determine the net present value of the investment in the paint and body shop. (Round present value factor calculations to 4 decimal places, eg. 1.2151 and final answer to O decimal place, eg. 125. Enter negative amounts using either a negative sign preceding the number eg. 45 or parentheses eg: (451) Net present value $ Should Sonnetson invest in the paint and body shop? Sonnetson invest in the paint and body shop. e Textbook and Media Calculate the internal rate of return of the investment (approximate). Intemal rate of return is 3 e Textbook and Media less than 30N equal to 30% greater than ON Calculate the payback period of the investment (Round answer to 1 decimal place, as 12.5) Payback period years e Textbook and Media Calculate the accounting rate of return (Round final answer to 2 decimal place... 45.67%)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting For Executives And MBAs

Authors: Wallace, Simko, Ferris

4th Edition

1618531980, 9781618531988

More Books

Students also viewed these Accounting questions