Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can someone help with this problem? Its cost accounting. 22) Kravitz Company is planning to acquire a $250,000 machine to improve manufacturing efficiencies, thereby reducing

Can someone help with this problem? Its cost accounting. image text in transcribed
22) Kravitz Company is planning to acquire a $250,000 machine to improve manufacturing efficiencies, thereby reducing annual cash operating costs (before taxes) by an estimated $80,000 for each of the next five years. The company's estimated weighted-average cost of capital (WACC) is 8%. The machine will be depreciated using straight-line method over a five-year period with no salvage value. Fritz is subject to a combined 40% income tax rate, t. Note: at 8%, the PV annuity factor for five years is 3.993; at 800, PV $1 factors are as follows: for year 1-0.926; for year 2-0.85% for year 3-0.794; for year 4-0735 and, for year 5 0.681 Required: 1. What is the estimated net present value (NPV) of the proposed investment, rounded to the nearest whole number? 2. What is the payback period, in years (rounded to one decimal place, that is, to tenth of a year, e.g., 4.085 years 4.1 years)? 3. What is the estimated internal rate of return (IRR) on the proposed investment? 4. What is the accounting rate of return? 5. What is the profitability ratio

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_2

Step: 3

blur-text-image_3

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

Introduction To Managerial Accounting

Authors: Jeannie Folk, Ray Garrison, Eric Noree

1st Edition

0072468440, 978-0072468441

More Books

Students also viewed these Accounting questions

Question

Explain how to make a to-do list and a schedule.

Answered: 1 week ago

Question

What would you do?

Answered: 1 week ago