Sheridan Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,000 $40,000 8 years $9,800 $0 Annual rate of return $35,000 Your answer is incorrect. Cost New Equipment Estimated useful life Salvage value in 8 years Annual cash operating costs Depreciation is $10,000 per year for the old equipment. The straight-line depreciation method wor over an eight-year period with salvage value of $4,400. $39,000 8 years $4,400 $29,000 Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.) % used for the new equipment

Sheridan Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,000 $40,000 8 years $9,800 $0 Annual rate of return $35,000 Your answer is incorrect. Cost New Equipment Estimated useful life Salvage value in 8 years Annual cash operating costs Depreciation is $10,000 per year for the old equipment. The straight-line depreciation method wor over an eight-year period with salvage value of $4,400. $39,000 8 years $4,400 $29,000 Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.) % used for the new equipment

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 42P

See similar textbooks

Similar questions

Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. Dunedin buys equipment frequently and wants to print a depreciation schedule for each assets life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.
Current Attempt in Progress Sandhill Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Profitability index Machine A $77,300 8 years 0 Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to O decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Which machine should be purchased? eTextbook and Media Save for Later $20,200 $4,970 Machine A…
Required information [The following information applies to the questions displayed below.] Montego Production Company is considering an investment in new machinery for its factory. Various information about the proposed investment follows: Initial investment Useful life Salvage value Annual net income generated Montego's cost of capital Assume straight line depreciation method is used. Help Montego evaluate this project by calculating each of the following: $ 860,000 6 years Net Present Value $ 20,000 $ 66,000 11% Required: 4. Recalculate Montego's NPV assuming its cost of capital is 12 percent. (Future Value of $1, Present Value of $1. Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.
Current Attempt in Progress Cullumber Partners is evaluating the replacement of an older machine with either the new SuperPlus or MaxPlus machine. The market value of the original machine is $8,000 but it has an expected salvage value of $1,000 in 5 years. The details regarding the two new machines are as follows: Reduced Annual Pretax Machine Cost Useful Life Salvage Value Operating Cash Flows SuperPlus MaxPlus $25,000 5 years $2,000 $5,700 $38,000 5 years $3,000 $5,900 The company's tax rate is 40% and the machines are Class 10 assets with a 30% CCA rate. The company's required return is 11%. Estimate the NPV of replacement. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round intermediate and final answers to O decimal places, e.g., 2,345.) NPV of SuperPLUS $ NPV of MaxPLUS $
Current Attempt in Progress BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do, Estimates regarding each machine are provided below. Original cost Estimated life i Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A Profitability index $78,300 Which machine should be purchased? 8 years $19,700 $5,040 Machine A 0 should be purchased Click here to view the factor table Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Of the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to O decimal places, s 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided) Machine B $185,000 8 years 0…
Required information [The following information applies to the questions displayed below.] Montego Production Company is considering an investment in new machinery for its factory. Various information about the proposed investment follows: Initial investment Useful life $ 860,000 6 years Salvage value Annual net income generated Montego's cost of capital Assume straight line depreciation method is used. Help Montego evaluate this project by calculating each of the following: Net Present Value $ 20,000 $ 66,000 11% Required: 3. Net present value. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.
Quary Company is considering an investment in machinery with the following information. Initial investment Useful life Salvage value Expected sales per year (a) Compute the investment's annual income and annual net cash flow. (b) Compute the investment's payback period. Required A Required B Complete this question by entering your answers in the tabs below. $ 335,000 9 years $ 20,000 16,750 units Annual Amounts Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Selling price per unit Compute the investment's annual income and annual net cash flow. Expenses Income Net cash flow $ 75,375 35,000 8,375 $ 10
Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,640 $40.600 8 years $10,400 $0 $35,100 New Equipment Cost Estimated useful life Salvage value in 8 years Annual cash operating costs $39,000 8 years $4,600 $29.900 Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600.
A company is considering two alternative investments in a machine as part of a workshop upgrade. Partial results of some financial analysis are as follows: ARR Payback Period NPV @ 6% IRR pa Machine A 25% 2.9 years $10,666 21% Machine B 33.3% 27% Machine B will cost $20,000 and have estimated annual incremental cash flows of $9,700 for the next 3 years AND an estimated salvage value of $5,800 at the end of the 3 year period. Calculate the Payback Period (PBP) for Machine B assuming cash flows are received evenly throughout the year. Calculate the NPV for Machine B if the cost of capital is 6.8% pa and assuming cash flows are received at the end of each year Explain which machine you would recommend based on all…
Bailey Corporation is considering purchasing one of two new processing machines. Either machinewould make it possible for the company to produce its products more efficiently than it is currentlyequipped to do. Estimates regarding each machine are provided below:Machine A Machine BInitial Investment $113,250 $270,000Estimated life 10 years 10 yearsSalvage value -0- -0-Estimated annual cash inflows $30,000 60,000Estimated annual cash outflows $ 7,500 $15,000Instructions1. Calculate the net present value and profitability index of each machine. Assume an 8% discountrate. Which machine should be purchased?Bailey Corporation did some further research and found one other possible machine that would producethe same type of production efficiencies. The information regarding Machine C is below:Machine CInitial Investment $250,000Estimated life 10 yearsSalvage value $ 30,000Estimated annual cash inflows $ 45,000Estimated annual cash outflows $ 10,0002. Calculate the net present value and…
The Xenia Corporation is considering replacing one of its hand-operated assembly machines with a new fully automated machine. Based on the information given in the following table determine the cash flows associated with this replacement Keep Machine operator Maintenance cost Cost of defects Depreciable value of old machine Depreciation Expected life Age Salvage value in 5 years Current salvage value Tax rate $25,000 per year $2000 per year $6000 $50,000 $5000 per year 10 years 5 years old Zero $5000 34 percent Replace Cost of new machine Installation fee Transportation charge Maintenance cost Expected life Salvage value Depreciation method $60,000 $3,000 $3,000 $3,000 per year 5 years $20,000 Straight-line
nitial investment—Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 2 years ago at an installed cost of $19,800; it was being depreciated under MACRS using a 5-year recovery period. (See table LOADING... for the applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,900 and requires $4,500 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $25,700 without incurring any removal or cleanup costs. The firm is subject to a 40% tax rate. Calculate the initial investment associated with the proposed purchase of a new grading machine. Data table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Rounded Depreciation…