Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following relates to a proposed equipment purchase: Cost$153,000Salvage value$3,000Estimated useful life4yearsAnnual net cash flows$50,600Depreciation methodStraight-line Ignoring income taxes, the annual net income amount used

The following relates to a proposed equipment purchase:

Cost$153,000Salvage value$3,000Estimated useful life4yearsAnnual net cash flows$50,600Depreciation methodStraight-line

Ignoring income taxes, the annual net income amount used to calculate the accounting rate of return is:

Multiple Choice

  • $50,600
  • $13,100
  • $13,850
  • $88,100
  • $49,850

A company is considering the purchase of new equipment for $99,000. The projected annual net cash flows are $38,800. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 8% return on investment. The present value of an annuity of $1 for various periods follows:

PeriodPresent value of an annuity of $1 at 8%10.925921.783332.5771

What is the net present value of this machine assuming all cash flows occur at year-end?

Multiple Choice

  • $33,000
  • $4,800
  • $991
  • $37,800
  • $97,414

the following present value factors are provided for use in this problem.

PeriodsPresent Value

of $1 at 8%Present Value of an

Annuity of $1 at 8%10.92590.925920.85731.783330.79382.577140.73503.3121

Cliff Co. wants to purchase a machine for $40,000, but needs to earn a return of 8%. The expected year-end net cash flows are $12,000 in each of the first three years, and $16,000 in the fourth year. What is the machine's net present value?

Multiple Choice

  • $(9,075).
  • $2,685.
  • $42,685.
  • $(28,240).
  • $52,000.

company is planning to purchase a machine that will cost $24,600 with a six-year life and no salvage value. The company uses straight-line depreciation. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine?

Sales$91,000Costs:Manufacturing$52,100Depreciation on machine4,100Selling and administrative expenses31,000(87,200)Income before taxes$3,800Income tax (35%)(1,330)Net income$2,470

Multiple Choice

  • 50.00%.
  • 10.04%.
  • 4.10%.
  • 33.33%.
  • 20.08%.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Fundamentals of Cost Accounting

Authors: William N. Lanen, Shannon Anderson, Michael W Maher

6th edition

1259969479, 1259565408, 978-1259969478

More Books

Students also viewed these Accounting questions

Question

Elaborate the participation of the U.S. investors in trading ADRs.

Answered: 1 week ago