You manufacture car parts using equipment and direct labor. You are planning to buy a new machine for $1,000. The machine will generate net cash flows of $250 a year for 10 years. The salvage value after 10 years is zero. Compute ARR (accounting rate of return). O 50% O 15% O 25% 30% O not enough information need to know accounting income and accounting depreciation -
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- Baird Rentals can purchase a van that costs $110,000; it has an expected useful life of five years and no salvage value. Baird uses straight-line depreciation. Expected revenue is $40,425 per year. Assume that depreciation is the only expense associated with this Investment. Required a. Determine the payback period. Note: Round your answer to 1 decimal place. b. Determine the unadjusted rate of return based on the average cost of the investment. Note: Round your answer to 1 decimal place. (l.e., .234 should be entered as 23.4). a. Payback period b. Unadjusted rate of return years %A machine can be purchased at t=0 for $20,000. The estimated life is 15 years, with an estimated salvage value of zero at that time. The average annual operating and maintenance expenses are expected to be $5,500. If MARR =2.54%, what must the average annual revenues be in order to be indifferent between purchasing the machine and doing nothing? $7,120 $3,880 $6,969 @$7,213 $7,1752. Super Apparel wants to replace an old machine with a new one. The new machine would increase annual revenue by $200,000 and annual operating expenses by $80,000. The new machine would cost $400,000. The estimated useful life of the machine is 10 years with zero salvage value. i. Compute Accounting Rate of Return (ARR) of the machine using above information. ii. Should Super Apparel purchase the machine if management wants an Accounting Rate of Return of 19% on all capital investments? Hint: Use Average Income or Profit after deducting tax, depreciation, and operating expenses.
- 1. Use the information below for the next two questions. Leaky Pipe Inc. is considering a new machine for its largest product line. The cash flows Lastalled Purchase Price S40, 000 Roduced Cost of Materials S 6,000 per year Labor Savings S9, 000 per year locrease in Working Capital $5, 000 (for Year 0 and I only) Depreciable Life (zero salvage value) 4 years Economic Life 8 years Required Return 12% Tax Rate 40% a . What is the NPV of this machine if it does not replace any other?. b. Suppose the machine replaces another machine with the following characteristics: Book Value of Old Machine $6.000 Market Value of Old Machine $4,000 Remaining Depreciable Life of Old Machine 6years Assume the old machine was not expected to have any salvage value and compute the NPV of the New Machine.a manufacturing company bought a new machine for $150,000. the machine will last ten years and will be depreciated using the straight-line method. the estimate salvage value of the machineis zero and should generate a yearly cash inflow of $39,000 Requirement: what is the accounting rate of return? (ignoring taxes)Stuart Rentals can purchase a van that costs $105,000; it has an expected useful life of three years and no salvage value. Stuart uses straight-line depreciation. Expected revenue is $52,220 per year. Assume that depreciation is the only expense associated with this investment. Required a. Determine the payback period. (Round your answer to 1 decimal place.) b. Determine the unadjusted rate of return based on the average cost of the investment. (Round your answer to 1 decimal place. (i.e., .234 should be entered as 23.4).) a. Payback period years b. Unadjusted rate of return %
- 1 A new backhoe costs Bob the Builder $X. It is expected to have a salvage value of $Y after N years. What rate of depreciation for the declining-balance method should Bob be using? X= Y= N= Depreciation Rate $750,000 $58,000 29 years Try Again What is the Book Value after 25 years? Try Again (Use unrounded rate)A machine costs $600,000 and is expected to yield an after-tax net income of $23,000 each year. Management predicts this machine has a 12-year service life and a $120,000 salvage value, and it uses straight-line depreciation. Compute this machine's accounting rate of return. Choose Numerator: 1 7 Accounting Rate of Return Choose Denominator:A machine costs $500,000 and is expected to yield an after-tax net income of $19,000 each year. Management predicts this machine has a 8-year service life and a $100,000 salvage value, and it uses straight-line depreciation. Compute this machine's accounting rate of return. Accounting Rate of Return Choose Numerator: Choose Denominator: Accounting Rate of Return %3D Accounting rate of return
- How do I work out this problem? It is published by Flatworks the course is Financial Management Chapter 7. Thank you in advance. A new delivery truck can be purchased for $30,000. The old one could be sold day for $5,000, and has a book value of $3,000. In three years, the old truck will have a salvage value of $1,000 (and no book value). The new truck would be depreciated on a 5-year MACRS schedule. The firm’s tax rate is 21%. Assume the remaining book value of the old truck will be depreciated in year 1, and that the new truck will have a salvage value of $10,000 in year 3. a. What are the appropriate capital spending items to include in a capital budgeting analysis for the decision to purchase the new truck (assuming the old one would be sold to make room in the garage)? b. What are the appropriate operating cash flows to consider for the first three years? c. If the new truck will also save the firm $1,000 a year in gas expenses, what are the appropriate operating cash flows for…You find a sunken ship with 10,000 tons of silver. You buy a crane with $500,000 to haul silver. Salvage value crane is $100,000. If end first year you can hall only 1500 tons silver, what is depreciation expense per ton end first year?Denver Company buys a machine for $65,000 that has an expected life of 4 years and no salvage value. The company uses straight-line depreciation. The company anticipates a yearly net income of $3,100 after taxes of 30%, with the cash flows to be received evenly throughout each year. What is the accounting rate of return? Multiple Choice 2.86%. 4.77%. 19.08%. 9.54%. 6.68%.
