Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I've been stuck on this question for days. Any and all answers would be greatly appreciated! Bob Jensen inc. purchased a $750,000 machine to manufacture

image text in transcribed
image text in transcribed
I've been stuck on this question for days. Any and all answers would be greatly appreciated!
Bob Jensen inc. purchased a $750,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-ine depreciation. Jensen uses a 10% discount rate in evaluating capital investments, the investment is subject to taxes, and the projected pretax operating cash inflows are as follows: Jensen has been paying 25% for combined federal, state, and local income taxes, a rate that is not expected to change during the period of this investment. The fim uses straight-line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel, compute the following for the proposed investment 1. The payback petiod, under the assumption that the cash inflows occur evenly throughout the year. (Do not round intermediate calculations. Round your final answer to 1 decimal place.) 2. The accounting (book) rate of return based on (a) inithal investment, and (b) average investment. (Round your final answers to 1 decimol place.) 3. The net present value (NPV). (Do not round intermediate calculations. Round your final answer to neorest whole dollar amount.) 4. The present value payback period of the proposed investment under the assumption that the cash infloms occur evenly throughout the year. (Nole use the formula at the bottom of Agrendix. . Fable 1 to calculate present value factors) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) 5. The internal rate of retuin (IRR). (Do not round intermediote calculations. Round your final answer to 1 decimal place.) 6. The moditied intemal rate of retum (MRP). (Do not round intermediate calculations. Round your final answer to 1 decimal place.) (in conjunction with this question, you might want lo consult either of the following fwo references: MiRR. Euriction andior BR. it! Excel)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Accounting questions