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Please complete this assignment for managerial accounting. Problem 1 Equipment is purchased at a cost of $80,000. As a result, annual cash revenues are expected
Please complete this assignment for managerial accounting.
Problem 1 Equipment is purchased at a cost of $80,000. As a result, annual cash revenues are expected to increase by $45,000; annual cash expenses are expected to increase by $12,000; straight-line depreciation is used; the asset has a seven-year life; the salvage value is $10,000. Assume the company is in a 34% tax bracket. 1. Determine the accounting rate of return? (round to the nearest %) 2. Determine the payback period? 3. Determine the NPV assuming a minimum required rate of return of 8%? Problem 2 (Ignore taxes for this problem) Terra Networks is planning to buy injection molding machinery costing $180,000. This machinery's expected useful life is 5 years. They require a minimum rate of return of 8%, and have calculated the following data pertaining to the purchase and operation of this machinery: Year Estimated Annual Estimated Annual Depreciation Cash Inflows Cash Outflows 1 $ 40,000 $8,000 $28,000 2 $50,000 $18,000 $28,000 3 $75,000 $22,000 $28,000 4 $105,000 $35,000 $28,000 5 $110,000 $50,000 $28,000 1. Determine Terra's payback period, accounting rate of return, and NPV for this investment? Problem 3 Company X is planning on purchasing a 3-D printer. The expected cost of this printer is $75,000, and it is expected to have a useful life of 6 years and an estimated salvage value of $3,000. The printer is expected to produce cash savings of $23,000 per year in reduced labor costs and the cash operating costs to run this printer are estimated to be $5,000 per year. Assuming Company X is in the 34% tax bracket and has a minimum desired rate of return of 12% on this investment. Determine the: 1. (a) payback period, (b) ARR, and (c) NPV (Ignoring taxes), and 2. (a) payback period, (b) ARR, and (c) NPV (Assuming taxes)Step by Step Solution
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