Question

m - Ch 23 & 24 Factortno cost with annthnew except for d $1 (Use a naterialn 490,000 140,000 the net present value for this machine using a discount rate of 8% and assuming that cash flows occur at each year-end. (Hint Salvage value is a cash inflow at the end of the asset's life.) Next > くPrey 25of25

Answer 1

Answer 1.

Cost of Machine = $507,000
Salvage Value = $11,000
Useful Life = 4 years

Annual Depreciation = (Cost of Machine - Salvage Value) / Useful Life
Annual Depreciation = ($507,000 - $11,000) / 4
Annual Depreciation = $124,000

Answer 2.

Answer 3.

Payback Period = Cost of Investment / Annual Net Cash Flow
Payback Period = $507,000 / $169,260
Payback Period = 3.00 years

Answer 4.

Annual Average Investment = (Cost of Investment + Salvage Value) / 2
Annual Average Investment = ($507,000 + $11,000) / 2
Annual Average Investment = $259,000

Accounting Rate of Return = Annual After-tax Net Income / Annual Average Investment
Accounting Rate of Return = $45,260 / $259,000
Accounting Rate of Return = 17.47%

Answer 5.