Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Rundle Electronics is considering investing in manufacturing equipment expected to cost $320,000. The equipment has an estimated useful life of four years and a salvage

image text in transcribedimage text in transcribedimage text in transcribed
image text in transcribedimage text in transcribedimage text in transcribed
Rundle Electronics is considering investing in manufacturing equipment expected to cost $320,000. The equipment has an estimated useful life of four years and a salvage value of $19,000. It is expected to produce incremental cash revenues of $160,000 per year. Rundle has an effective income tax rate of 30 percent and a desired rate of return of 12 percent. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required a. Determine the net present value and the present value index of the investment, assuming that Rundle uses straight-line depreciation for financial and income tax reporting b. Determine the net present value and the present value index of the investment, assuming that Rundle uses double-declining- balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Rundle uses straight-line depreciation. e. Determine the payback period and unadjusted rate of return (use average investment), assuming that Rundle uses double- declining-balance depreciation. (Note. Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.)Complete this question by entering your answers in the tabs below. Req A and B Req D and E Determine the net present value and the present value index of the investment, assuming that Rundle uses straight-line depreciation and double-declining-balance for financial and income tax reporting. Note: Round your intermediate calculations and answers for "Net present value" to the nearest whole dollar amount. Net Present Value Present Value Index a. bReq A and B Req D and E Determine the payback period and unadjusted rate of return (use average investment), assuming that Rundle uses straight- line depreciation and double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.) Note: Round your answers to 2 decimal places. Show less A Payback Period Unadjusted Rate of Return d. years % e years %

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

Recommended Textbook for

Management Accounting Information for Decision-Making and Strategy Execution

Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young

6th Edition

137024975, 978-0137024971

Students also viewed these Accounting questions