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Fancy Pants, Inc. is a clothing manufacturer. The company has decided to purchase equipment for an additional clothing product line that would increase revenues by
Fancy Pants, Inc. is a clothing manufacturer. The company has decided to purchase equipment for an additional clothing product line that would increase revenues by $80,000 per year. Incremental cash operating expenses would be $43,000 per year. The equipment would cost $120,000 and will have an eight-year life (annual straightline depreciation expense will be $15,000 per year). It will have no salvage value at the end of elght years. What is the machine's simple rate of return a.k.a. accounting rate of return)? 66.7% 30.8% O 15.6% 18.3% Which of these is not an example of a typical cash outflow? Expanding working capital Depreciation on the machinery The immediate initial investment in an asset O Making yearly repairs on machinery The present value of a cash flow decreases as it moves further into the future. True O False EFG company is deciding whether it should buy a new machine. The new machine has a useful life of 6 years. The machine will reduce operating costs by $8,000 per year. If EFG company needs to buy a machine that has a payback period of 4 years, what would be the maximum price EFG company would be willing to pay for the new machine? O $32,000 $ 2.000 $ 16,000 $48.000
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