Answered step by step
Verified Expert Solution
Question
1 Approved Answer
TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... Tanner Corporation is considering the acquisition of a new machine that is expected
TB Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $77,000 before income taxes. The machine costs $230,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 40% income tax rate, and has an after-tax hurdle rate of 10%. FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity Year 10% 1 1.100 2 1.210 3 1.331 4 1.464 1.611 1.772 Required: at 10% 1.000 10% 0.909 2.100 0.826 3.310 0.751 4.641 0.683 6.105 0.621 7.716 0.564 at 10% 0.909 1.736 2.487 3.170 3.791 4.355 A. Compute the machine's accounting rate of return on the initial investment. B. Compute the machine's net present value. Note: For all requirements, do not round intermediate calculations. Round final answers to whole number. Answer is complete but not entirely correct. A. Rate of return B. Net present value % 14,899
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started