1. Ans - 2.5 years
Explanation:
The payback method is the original investment divided by cash flow after taxes, or $5,000 divided by $2,000 for a payback of 2.5 years. Payback does not utilize discounted cash flows, so the information regarding the time value of money is not needed to solve the problem.
2 & 3.
Ans - B) 3.75
Explanation:
1. Major Corporation is considering the purchase of a new machine for $5,000. The machine has...
Overland Corporation has gathered the following data on a proposed investment project: The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The accrual accounting rate of return on the investment is: A. 10.00% B. 16.67% C. 36.67% D. 26.67% $150,000 $40,000 Investment required in equipment Annual cash inflows Salvage value of equipment... Life of the investment........ Required rate of return ............. $0 10 years 10%
2. Oriental Corporation has gathered the following data on a proposed investment project: Investment in depreciable equipment Annual net cash flows Life of the equipment Salvage value Discount rate $ 450,000 $ 90,000 10 years $ 0 78 The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment would be: Joetz Corporation has gathered the following data on a proposed investment project (Ignore...
joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment $ 30,000 Annual cash inflows $ 6,000 Salvage value of equipment $ 0 Life of the investment 15 years Required rate of return 10 % The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment is: Multiple Choice 5 years 15 years 2 years...
Oriental Corporation has gathered the following data on a proposed investment project: Investment in depreciable equipment $ 610,000 Annual net cash flows $ 88,000 Life of the equipment 16 years Salvage value $ 0 Discount rate 10 % The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment would be:
Which of the following statements is correct? C The payback period is the length of time it takes for an investment to recoup its A) own initial cost out of the cash receipts it generates. O B Projects with shorter payback periods are always more profitable than projects with longer payback periods. C The payback method of making capital budgeting decisions gives ful c) consideration to the time value of money. O If new equipment is replacing old equipment, any...
4) The Zone Company is considering the purchase of a new machine machine is expected to improve productivity and thereby increase cas year for 7 years. It will have no salvage value. The company req of 12 percent on this type of capital investment. (Ignore income taxe new machine at a cost of $1,040,000. The and thereby increase cash inflows by $250,000 per divage value. The company requires a minimum rate of return (Ignore income taxes for this problem.) Required:...
BSU Inc. wants to purchase a new machine for $41,010, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,100, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $9,000 each year of its economic life. The straight-line depreciation method would be used for the new...
BSU Inc. wants to purchase a new machine for $31,320, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,300, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new...
BSU Inc. wants to purchase a new machine for $44,055, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,400, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $10,500 each year of its economic life. The straight-line depreciation method would be used for the new...
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment $ 40,000 Annual cash inflows $ 10,000 Salvage value of equipment $ 0 Life of the investment 15 years Required rate of return 10 % The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The simple rate of return for the investment (rounded to the nearest tenth of a...