Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Burlington Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with

image text in transcribed

Burlington Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: EE (Click the icon to view the savings in cash operating costs.) Burlington Cola uses a required rate of return of 14% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Present Value of $1 table Read the requirements. i Requirements i Data Table 1. Net present value. (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) The net present value is 2. Payback period. (Round your answer to two decimal places.) Calculate the following for the special purpose bottling machine: 1. Net present value 2. Payback period 3. Discounted payback period 4. Internal rate of return (using the interpolation method) Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation. Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.) Year Amount Year 1 $ 15.000 Year 2 11,000 Year 3 10,000 Year 4 8,000 The number of years for the payback period is 3. Discounted payback period. Total $ 44,000 O A. 3.68 OB. 3.75 OC. Amount can not be determined OD. 3.9 Print Done Print Done 4. Internal rate of return (using the interpolation method). (Use a trial-and-error approach and straight-line interpolation as necessary. Round your answer to the nearest hundredth of a percent, X.XX%.) The internal rate of return (IRR) is 0 %. 5. Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation. Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.) (Round your final answer to the nearest hundredth of a percent, X.XX%.) The accrual accounting rate of return (AARR) is %

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

Total Quality Safety Management And Auditing

Authors: Michael B. Weinstein

1st Edition

1566702836, 978-1566702836

More Books

Students also viewed these Accounting questions

Question

Plan the steps in your career toward a club managers position. LO.1

Answered: 1 week ago