Sunland Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(1200). Annual cost savings were: $28000 for year 1: $24000 for year 2; and $19000 for year 3. The amount of the initial investment was Present Value PV of an Annuity Year of 1 at 12% of 1 at 12% 1 0.893 0.797 2 3 0.712 0.893 1.690 2.402

Sunland Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(1200). Annual cost savings were: $28000 for year 1: $24000 for year 2; and $19000 for year 3. The amount of the initial investment was Present Value PV of an Annuity Year of 1 at 12% of 1 at 12% 1 0.893 0.797 2 3 0.712 0.893 1.690 2.402

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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An economic analysis is being performed in real (not actual) dollars. The company’s combined MARR is 10%, and the inflation rate is 4%. The asset has a first cost of $10,000. It will be depreciated as MACRS 3-year property using rates of 33.33%, 44.45%, 14.81%, and 7.41%. What depreciation amount will be shown in year 3 of the analysis?
Richman Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(900). Annual cost savings were: $10,000 for year 1; $8,000 for year 2; and $6,000 for year 3. The amount of the initial investment was Present Value PV of an Annuit Year of 1 at 12% of 1 at 12% 1 .893 .893 2 .797 1.690 3 .712 2.402 Select one: a. $20,116. b. $20,478 c. $18,316 d. $20,000 e. $18,678
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year 1 2 3 4 5 Income from Operations $100,000 40,000 40,000 10,000 10,000 The cash payback period for this investment is a. 4 years b. 5 years c. 3 years O d. 2 years Net Cash Flow $180,000 120,000 100,000 90,000 120,000
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year 1 2 3 4 5 Operating Income $100,000 40,000 40,000 10,000 10,000 Net Cash Flow $180,000 120,000 100,000 90,000 120,000 The cash payback period for this investment is O a. 3 years O b. 5 years O c. 2 years O d. 4 years
An asset was purchased for P66,000. The asset is expected to last for 6 years and will have a salvage value of P16,000. The company expects the income before tax to be P7,200 and the tax rate of the company is 30%. What is the average return on investment (accounting rate of return)? choices: 17.6% 12.3% 7.6% 10.9%
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year OperatingIncome Net CashFlow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000 The average rate of return for this investment is
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year OperatingIncome Net CashFlow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000 The cash payback period for this investment is
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for Years 1 through 5 are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000
An asset was purchased for P66,000. The asset is expected to last for 6 years and will have a salvage value of P16,000. The company expects the income before tax to be P7,200 and the tax rate of the company is 30%. What is the average return on investment (accounting rate of return)? Group of answer choices 17.6% 12.3% 7.6% 10.9%
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Operating Net Cash Year Income Flow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 10,000 120,000 The average rate of return for this investment is Oa. 10% Оb. 18% Ос. 16% Od. 58%
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Operating Net Cash Year Income Flow 1 $100,000 $180,000 2 40,000 120,000 40,000 100,000 4 10,000 90,000 10,000 120,000 The average rate of return for this investment is Oa. 10% Оb. 18% Ос. 16% С. Od. 58%
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. 1.25

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