Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ursus, Inc., is considering a project that would have a five-year life and would require a $667,000 investment in equipment. At the end of five

Ursus, Inc., is considering a project that would have a five-year life and would require a $667,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (gnore income taxes.) Contribution margin Sales Variable expenses Fixed expenses Orpreciation Net operating Income $1,000,000 1,250,000 550,000 Fixed out-of-pocket cash expenses 5320.000 111,400 453,400 $ 16.000 Click here to view Exhibit 14B-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using the tables provided. All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 14% Required: a Compute the project's net present value. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) b. Compute the project's internal rate of retum. (Round your final enswer to the nearest whole percent.) c. Compute the project's payback period. (Round your answer to 2 decimal place.) d. Compute the project's simple rate of return (Round your final answer to the nearest whole percent.) a. Net present value b Internal rate of return % Payback period d Sample rate of return years % able Questions Sawd Joanette, Inc., is considering the purchase of a machine that would cost $590,000 and would last for 9 years, at the end of which, the machine would have a salvage value of $59,000. The machine would reduce labor and other costs by $119,000 per year. Additional working capital of $5,000 would be needed immediately, all of which would be recovered at the end of 9 years. The company requires a minimum pretax return of 18% on all investment projects. (Ignore income taxes) Click here to view Exhibit 148-1 and Exhibit 148-2 to determine the appropriate discount factor(s) using the tables provided. Required: Determine the net present value of the project (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.) Not present valua Saved activity/question-group/k Ursus, Inc., is considering a project that would have a five-year life and would require a $667,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes): Sales Variable expenses Contribution margin Fixed expenses: Fixed out-of-pocket cash expenses Depreciation $1,800,000 1,250,000 550,000 $320,000 133,400 453,400 Net operating income $ 96,600 Click here to view Exhibit 148-1 and Exhibit 14B-2. to determine the appropriate discount factor(s) using the tables provided. All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 14% Required: a. Compute the project's net present value. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) b. Compute the project's internal rate of return. (Round your final answer to the nearest whole percent.) c. Compute the project's payback period. (Round your answer to 2 decimal place.) d. Compute the project's simple rate of return. (Round your final answer to the nearest whole percent.) Joanette, Inc, is considering the purchase of a machine that would cost $590,000 and would last for 9 years, at the end of which, the machine would have a salvage value of $59,000. The machine would reduce labor and other costs by $119,000 per year. Additional working capital of $5,000 would be needed immediately, all of which would be recovered at the end of 9 years. The company requires a minimum pretax return of 18% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 14B-1 and Exhibit 148-2 to determine the appropriate discount factor(s) using the tables provided Required: Determine the net present value of the project (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.)image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

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_2

Step: 3

blur-text-image_3

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

Principles Of Fraud Examination

Authors: Joseph T Wells

2nd Edition

0470128836, 9780470128831

More Books

Students also viewed these Accounting questions