Please answer in text form without image Current Attempt in ProgressWildhorse Trucking is considering purchasing a new truck. It is expected the truck will increase annual revenues by $41969 andincrease annual expenses by $30800 including depreciation. The truck will cost $121000 and will have a $3100 salvage value at theend of its useful life. Compute the annual rate of return.O 18.9%O 18.0%O 9.0%O 9.2%e Textbook and MediaSave for LaterAttempts: 0 of 2 usedSubmit Answer

Annual rate of return is that amount which is earned by the investor from the assets over life of…

Answered: Wildhorse Trucking is considering…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...

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Average rate of returncost savings Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of 125,000 with a 15,000 residual value and an eight-year life. The equipment will replace one employee who has an average wage of 28,000 per year. In addition, the equipment will have operating and energy costs of 5,150 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment.
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer’s base price is $1,080,000, and it would cost another $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $605,000. The MACRS rates for the first 3 years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $380,000 per year in before-tax operating costs, mainly labor. Campbell’s marginal tax rate is 35%. What is the Year-0 cash flow? What are the net operating cash flows in Years 1, 2, and 3? What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of working capital)? If the project’s cost of capital is 12%, should the machine be purchased?
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
Palmer Corporation is considering the purchase of a new plece of equipment. The cost savings from the equipment would result in an annual increase in net income of $152,000. The equipment will have an initial cost of $494,000 and a 8 year useful life. If the salvage value of the equipment is estimated to be $78,000, what is the payback period? Multiple Choice 2.42 years 3.25 years 8.00 years 4.00 years
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…
You are given opportunity to purchase product for $42, 000. The product will have annual operating expenses of $4,000, and a salvage value of $20,000 at the end of its useful life of 6 years. Assuming a discount rate of 9.0%, what is the minimum acceptable revenue to justify taking this project? A 1.01% B $333 C $2704 D $767 E $10704
Belmont Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual A in net operating income of $210,000. The equipment will have an initial cost of $1,000,000 and an 8-year useful ife, if there is no salvage value of the equipment, what is the accounting rate of return? Multiple Choice O O 21.0% 16.0% O 42.0% O 13.5%
Assume that a company is choosing between two alternatives-keep an existing machine or replace it with a new machine. The costs associated with the two alternatives are summarized as follows: Multiple Choice Purchase cost (new) Remaining book value Overhaul needed now Annual cash operating costs Salvage value (now) Salvage value (eight years from now) $ 6,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Assuming a discount rate of 12%, what is the net present value of the cash flows associated with keeping the existing machine? $(50,760) $(56,760) Existing Machine $ 15,000 $ 6,000 $ 5,000 $ 10,500 $ 2,000 $ 1,000 $(71,760) New Machine $ 22,000 $ 7,000
Tires-R-Us is considering the purchase of new tire-balancing equipment. The machine, which will cost $12,699, will result in annual savings of $1500 with a salvage value at the end of 12 years of $250. For a MARR of 6%, use B/C analysis to determine whether the equipment should be purchased.
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…
Current Attempt in Progress Blossom Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $122,610 and will increase annual expenses by $72,000 including depreciation. The oil well will cost $471,000 and will have a $11,000 salvage value at the end of its 10-year useful life. Calculate the annual rate of return. (Round answer to O decimal places, e.g. 13%.) Annual rate of return %
Exercise D Jefferson Company is considering investing $33,000 in a new machine. The machine is expected to last five years and to have a salvage value of $8,000. Annual before-tax net cash inflow from the machine is expected to be $7,000. Calculate the unadjusted rate of return. The income tax rate is 40%.

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