,800. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 8% return on investment. The present value of an annuity of $1 for various periods follows: Period 1
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A company is considering the purchase of new equipment for $99,000. The projected annual net
Period
1
Present value of an annuity of $1 at 8%
2
0.9259
1.7833
3
2.5771
What is the
Multiple Choice
$33,000
$4,800
$991
$37,800
$97,414
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- The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 O 10.5% O 5.5% O 25.5% Operating O 15.5% Income $20,000 20,000 20,000 20,000 20,000 Net Cash Flow $95,000 95,000 The average rate of return (rounded to one decimal place) for this investment is 95,000 95,000 95,000Bassinger Company plans to buy a new machine for $60,000 that will have an estimated useful life of 3 years and no salvage value. The expected cash inflow is $24,000 annually. Bassinger Company has a cost of capital of 12%. Given that the present value of $1 after 3 periods at 12% is 0.71178, and the present value of an annuity for 3 periods at 12% is 2.40183, the profitability index is: 000 0.04 1.96 1.04 0.28 0.96The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 $18,750 18,750 18,750 18,750 18,750 The average rate of return for this investment 3 4 Operating Income 5 Net Cash Flow $93,750 93,750 93,750 93,750 93,750
- Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $68,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $34,000. The company's minimum desired rate of return for net present value analysis is 12%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. c. The net present value. Use the above table of the present value of an annuity of $1. Round to…Poe Company is considering the purchase of new equipment costing $85,500. The projected annual cash inflows are $35,700, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine. Periods Present Value of 1 at 10% Present Value of an Annuity of 1 at 10% 1 0.9091 0.9091 2 0.8264 1.7355 3 0.7513 2.4869 4 0.6830 3.1699 $45,409. $14,857. $27,665. $(14,857). $(27,665).Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $132,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $33,000. The company's minimum desired rate of return for net present value analysis is 10%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402- 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. % b. The cash payback period. c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest…
- Pina Colada, Inc. is considering purchasing equipment costing $42000 with a 6-year useful life. The equipment will provide annual cost savings of $12000 and will be depreciated straight-line over its useful life with no salvage value. Pina Colada requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate net present value of this investment? A. $30000 B. $11832 C. $8772 D. $10260Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $15,705 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 13% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate profitability index associated with this equipment? Round your answer to 2 decimal places.Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $248,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $62,000. The company's minimum desired rate of return for net present value analysis is 10%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place.% b. The cash payback period. c. The net present value. Use the above table of the present value…
- The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 3 4 5 Income from Operations $18,750 18,750 18,750 18,750 18,750 Net Cash Flow $93,750 93,750 93,750 93,750 93,750 The present value index for this investment is Oa. 0.95 Ob. 1.00 Oc. 1.05 Od. 1.25The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income fromOperations Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The net present value for this investment is: The answer is $19,875. How did they get this number?Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $544,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $68,000. The company’s minimum desired rate of return for net present value analysis is 15%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, assuming the annual earnings are equal to the net cash flows less the annual depreciation expense on the equipment. If required, round your answer to one decimal place. % b. The cash payback period. years c. The net…