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Need help with practice problem, please show work, thank you Adrian Sonnetson, the owner of Speedway Motors, is considering the addition of a paint and
Need help with practice problem, please show work, thank you
Adrian Sonnetson, the owner of Speedway 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 $785,400, 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: $651,300 Revenue Less: Material cost Labor Depreciation Other Income before taxes Taxes at 40% Net income 69,500 152,700 78,540 10,000 340,560 136,224 $204,336 Click here to view factor tables Your answer is partially correct. 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 decimal place, eg. 125. Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45).) Net present value $ 877336.7932 Should Sonnetson invest in the paint and body shop? Sonnetson should invest in the paint and body shop. Your answer is correct. Calculate the internal rate of return of the investment (approximate). Internal rate of return is greater than 30% eTextbook and Media * Your answer is incorrect. Calculate the payback period of the investment. (Round answer to 1 decimal place, eg. 12.5.) Payback period 2.4 years eTextbook and Media * Your answer is incorrect. Calculate the accounting rate of return. (Round final answer to 2 decimal place, eg. 45.67%.) Accounting rate of return 41.37 %Step by Step Solution
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