Question

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) (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 Req D and B Determine the net present value and the present value index of the investment, assuming that Harper uses straight- line depreciation and double-declining-balance for financial and income tax reporting. (Round your answers for "Net present value" to the nearest whole dollar amount and your answers for "Present value index" to 2 decimal places.) Show less Net present value Present value index < Req A and B Req D and EΣ

Answer 1

arning Series-- Maths Lab Manual........... ........5 No. Date. a) Calculation of Met Pembent Value I Cash flow Rate Present value 19.1. y 160,000 0.893 142880 12 160,000 0.797 197520 3) 160,000 0.72 113920 W 160,000 6.636 101760 4). 19,000 0.636 12084 498164 Med Prement value = Present value of cash flow - initial investment 498164 - 320 oco 178164 Prevent value index Neppresent value initial investment 178164 320,000 0.56 = Teacher's Signature. ...

(d). Cash flow 160,000 160,000 160, 000 Cumulative cash flow 16 0, 60 0 390,000 - 8 ค 5 Payback period = 2years.
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