Use the following to answer questions 76-79:(Ignore income taxes in this problem.) Perky Food Corporation produces and sells coffeejelly. Perky currently produces the jelly using a manual operation but is considering thepurchase of machinery to automate its operations. Information related to the two operations isas follows:Cost of machinery.Useful life of machinery.Expected salvage value in 12 years.Expected annual revenue (50,000 jars)..Expected annual variable costs.Expected annual fixed costs.*****B) 12.1%C) 14.5%D) 22.9%ManualOperation$210,000$42,000$72,000Perky's discount rate is 12%. Perky uses the straight-line method of depreciation.76. What is the net present value of automating operations using the incremental costapproach?Answer: A Level: Medium LO: 6AutomatedOperation$420,000$210,000$135,000$30,00012 years$0A) $11,940B) $56,940C) $(104,106)D) $112,684Answer: C Level: Medium LO: 177. Within what range does the internal rate of return fall?A) 6% to 8%B) 10% to 12%C) 12% to 14%D) 18% to 20%Answer: A Level: Medium LO: 278. What is the simple rate of return for automating operations?A) 3.8%

Simple Rate of Return=Net incomeCost of investment×100

Use the following to answer questions 76-79: (Ignore income taxes in this problem.) Perky Food Corporation produces and sells coffee jelly. Perky currently produces the jelly using a manual operation but is considering the purchase of machinery to automate its operations. Information related to the two operations is as follows: Cost of machinery. Useful life of machinery.. Expected salvage value in 12 years... Expected annual revenue (50,000 jars).. Expected annual variable costs. $210,000 $42,000 Expected annual fixed costs. $72,000 Perky's discount rate is 12%. Perky uses the straight-line method of depreciation. 76. What is the net present value of automating operations using the incremental cost approach? ***** **** Manual Automated Operation Operation $420,000 $210,000 $135,000 $30,000 A) $11,940 B) $56,940 C) $(104,106) D) $112,684 Answer: C Level: Medium LO: 1 77. Within what range does the internal rate of return fall? A) 6% to 8% B) 10% to 12% C) 14.5% D) 22.9% Answer: A Level: Medium LO: 6 12 years $0 C) 12% to 14% D) 18% to 20% Answer: A Level: Medium LO: 2 78. What is the simple rate of return for automating operations? A) 3.8% B) 12.1%

Use the following to answer questions 76-79: (Ignore income taxes in this problem.) Perky Food Corporation produces and sells coffee jelly. Perky currently produces the jelly using a manual operation but is considering the purchase of machinery to automate its operations. Information related to the two operations is as follows: Cost of machinery. Useful life of machinery.. Expected salvage value in 12 years... Expected annual revenue (50,000 jars).. Expected annual variable costs. $210,000 $42,000 Expected annual fixed costs. $72,000 Perky's discount rate is 12%. Perky uses the straight-line method of depreciation. 76. What is the net present value of automating operations using the incremental cost approach? * Manual Automated Operation Operation $420,000 $210,000 $135,000 $30,000 A) $11,940 B) $56,940 C) $(104,106) D) $112,684 Answer: C Level: Medium LO: 1 77. Within what range does the internal rate of return fall? A) 6% to 8% B) 10% to 12% C) 14.5% D) 22.9% Answer: A Level: Medium LO: 6 12 years $0 C) 12% to 14% D) 18% to 20% Answer: A Level: Medium LO: 2 78. What is the simple rate of return for automating operations? A) 3.8% B) 12.1%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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