a. Payback period = $156,000 / $64,272 = 2.4
b. Depreciation = $156,000 / 4 = $39,000
Income = $64,272 - $39,000 = $25,272
Average investment = ($156,000 + $0) / 2 = $78,000
Unadjusted rate of return = $25,272 / $78,000 = 32.4%
Zachary Rentals can purchase a van that costs $156,000; it has an expected useful life of four years and no salvage val...
Vernon Rentals can purchase a van that costs $185,000; it has an expected useful life of five years and no salvage value. Vernon uses straight-line depreciation. Expected revenue is $67,155 per year. Assume that depreciation is the only expense associated with this investment. Required Determine the payback period. (Round your answer to 1 decimal place.) Determine the unadjusted rate of return based on the average cost of the investment. (Round your answer to 1 decimal place. (i.e., .234 should be...
Gibson rentals can purchase a van that costs 144,00 Exercise 16-15 Computing the payback period and unadjusted rate of return for the same investment pportunity LO 16-4 Gibson Rentals can purchase a van that costs $140.000; it has an expected useful life of five years and no salvage value. Gibson uses straight-line depreciation. Expected revenue is $51,870 per year. Assume that depreciation is the only expense associated with this investment Required a. Determine the payback period. (Round your answer to...
Exercise 16-15 Computing the payback period and unadjusted rate of return for the same investment opportunity LO 16-4 Walton Rentals can purchase a van that costs $114,000; it has an expected useful life of three years and no salvage value. Walton uses straight-line depreciation. Expected revenue is $56,525 per year. Assume that depreciation is the only expense associated with this investment Required a. Determine the payback period. (Round your answer to 1 decimal place.) b. Determine the unadjusted rate of...
Finch Electronics is considering investing in manufacturing equipment expected to cost $260,000. The equipment has an estimated useful life of four years and a salvage value of $ 20,000. It is expected to produce incremental cash revenues of $130,000 per year. Finch has an effective income tax rate of 30 percent and a desired rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present...
Fanning Electronics is considering investing in manufacturing equipment expected to cost $250.000. 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 $125,000 per year. Fanning has an effective income tax rate of 40 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...
Exercise 16-12 Determining the payback period LO 16-4 Zachary Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $11.970,000, it will enable the company to increase its annual cash inflow by $5,700,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $33,440,000, it will enable the company to increase...
Munoz Electronics is considering investing in manufacturing equipment expected to cost $300,000. The equipment has an estimated useful life of four years and a salvage value of $ 17,000. It is expected to produce incremental cash revenues of $150,000 per year. Munoz has an effective income tax rate of 40 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...
Hardware Corp. is planning to buy production machinery. This machinery's expected useful life is 5 years, with a $10,000 salvage value. They require a minimum rate of return of 12%, and have calculated the following data pertaining to the purchase and operation of this machinery: Year Estimated annual cash inflows $ 60,000 80,000 95,000 115,000 140,000 Estimated annual cash outflows $ 10,000 20,000 25,000 35,000 50,000 Depreciation $30,000 $30,000 $30,000 $30,000 $30,000 Determine the Payback Period, Accounting Rate of Return....
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...
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...