Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Q1) Following machines are mutually exclusive.You may choose only one. 

Machine A will cost= $150,000, save company $40,000 per year for 5 years and can be sold for extra $20,000 at the end of 5 years.  At your firm's 10% cost of capital, it has Net Present Value of $14,050.  Its IRR (or ROI) is 13.4%.

Machine B will cost $190,000, save company $50,000 per year for 5 years, and have salvage value of $25,000.  At your firm's 10% cost of capital, it has Net Present Value of $15,062. Its IRR (or ROI) is 12.9%.

a. Which one would you select?

b. Describe what is meant by term Internal Rate of Return.

PRESENT VALUE OF A SINGLE PAYMENT
(Payment to be received in the future)
Year
8%
9%
10%
11%
12%
13%
14%
15%
1
0.9259
0.9174
0.9091
0.9009
0.8929
0.8850
0.8772
0.8696
2
0.8573
0.8417
0.8264
0.8116
0.7972
0.7831
0.7695
0.7561
3
0.7938
0.7722
0.7513
0.7312
0.7118
0.6931
0.6750
0.6575
4
0.7350
0.7084
0.6830
0.6587
0.6355
0.6133
0.5921
0.5718
5
0.6806
0.6499
0.6209
0.5935
0.5674
0.5428
0.5194
0.4972
6
0.6302
0.5963
0.5645
0.5346
0.5066
0.4803
0.4556
0.4323
7
0.5835
0.5470
0.5132
0.4817
0.4523
0.4251
0.3996
0.3759
8
0.5403
0.5019
0.4665
0.4339
0.4039
0.3762
0.3506
0.3269
9
0.5002
0.4604
0.4241
0.3909
0.3606
0.3329
0.3075
0.2843
10
0.4632
0.4224
0.3855
0.3522
0.3220
0.2946
0.2697
0.2472
11
0.4289
0.3875
0.3505
0.3173
0.2875
0.2607
0.2366
0.2149
12
0.3971
0.3555
0.3186
0.2858
0.2567
0.2307
0.2076
0.1869
13
0.3677
0.3262
0.2897
0.2575
0.2292
0.2042
0.1821
0.1625
14
0.3405
0.2992
0.2633
0.2320
0.2046
0.1807
0.1597
0.1413
15
0.3152
0.2745
0.2394
0.2090
0.1827
0.1599
0.1401
0.1229
16
0.2919
0.2519
0.2176
0.1883
0.1631
0.1415
0.1229
0.1069
17
0.2703
0.2311
0.1978
0.1696
0.1456
0.1252
0.1078
0.0929
18
0.2502
0.2120
0.1799
0.1528
0.1300
0.1108
0.0946
0.0808
19
0.2317
0.1945
0.1635
0.1377
0.1161
0.0981
0.0829
0.0703
20
0.2145
0.1784
0.1486
0.1240
0.1037
0.0868
0.0728
0.0611
PRESENT VALUE OF AN ORDINARY ANNUITY
(Payments at the end of each year)
Year
8%
9%
10%
11%
12%
13%
14%
15%
1
0.9259
0.9174
0.9091
0.9009
0.8929
0.8850
0.8772
0.8696
2
1.7833
1.7591
1.7355
1.7125
1.6901
1.6681
1.6467
1.6257
3
2.5771
2.5313
2.4869
2.4437
2.4018
2.3612
2.3216
2.2832
4
3.3121
3.2397
3.1699
3.1024
3.0373
2.9745
2.9137
2.8550
5
3.9927
3.8897
3.7908
3.6959
3.6048
3.5172
3.4331
3.3522
6
4.6229
4.4859
4.3553
4.2305
4.1114
3.9975
3.8887
3.7845
7
5.2064
5.0330
4.8684
4.7122
4.5638
4.4226
4.2883
4.1604
8
5.7466
5.5348
5.3349
5.1461
4.9676
4.7988
4.6389
4.4873
9
6.2469
5.9952
5.7590
5.5370
5.3282
5.1317
4.9464
4.7716
10
6.7101
6.4177
6.1446
5.8892
5.6502
5.4262
5.2161
5.0188
11
7.1390
6.8052
6.4951
6.2065
5.9377
5.6869
5.4527
5.2337
12
7.5361
7.1607
6.8137
6.4924
6.1944
5.9176
5.6603
5.4206
13
7.9038
7.4869
7.1034
6.7499
6.4235
6.1218
5.8424
5.5831
14
8.2442
7.7862
7.3667
6.9819
6.6282
6.3025
6.0021
5.7245
15
8.5595
8.0607
7.6061
7.1909
6.8109
6.4624
6.1422
5.8474
16
8.8514
8.3126
7.8237
7.3792
6.9740
6.6039
6.2651
5.9542
17
9.1216
8.5436
8.0216
7.5488
7.1196
6.7291
6.3729
6.0472
18
9.3719
8.7556
8.2014
7.7016
7.2497
6.8399
6.4674
6.1280
19
9.6036
8.9501
8.3649
7.8393
7.3658
6.9380
6.5504
6.1982
20
9.8181
9.1285
8.5136
7.9633
7.4694
7.0248
6.6231
6.2593

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919589

Have any Question? 


Related Questions in Accounting Basics

1 the concept of cost-benefit permeates smart decision

1. The concept of "Cost-Benefit" permeates smart decision making and accounting principles. How does this concept relate to incremental analysis. Provide an example to illustrate your point. Cost Benefit Respond 2. A cos ...

Using what youve learned from this phase compare accrual

Using what you've learned from this phase, compare accrual accounting to cash flow accounting. Discuss the strengths as weaknesses of each. Consider how each accounting system impacts a company's strategy formation and t ...

In january 2013 mitzu co pays 2650000 for a tract of land

In January 2013, Mitzu Co. pays $2,650,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $823,50 ...

On the cash dividends become a liability of a

On the ________, cash dividends become a liability of a corporation. declaration date date of record end of the fiscal year payment date ________ are equity securities in which the investor owns 20% or more, but less tha ...

Individual project instructionsobjectiveyour objective is

Individual Project Instructions OBJECTIVE Your objective is to use analytical tools to understand and improve business performance and to present your analysis using effective data visualizations in a dashboard format. F ...

Cost accounting systemsconsider the places of employment of

Cost Accounting Systems Consider the places of employment of the team members or businesses with which the team is familiar and the industries in which they operate. Create a 12-slide presentation, including detailed spe ...

Audit report modificationsthe final paper will be based on

Audit Report Modifications The final paper will be based on Appendix 6C Illustrative Audit Case: Keystone Computers at pages 237-244 in your text. Write, in outline format but in complete sentences, a 6 to 10 page audit ...

Write a 700- to 1050-word summary of the teams discussion

Write a 700- to 1,050-word summary of the team's discussion about IFRS versus GAAP, based on your team collaborative discussions. The summary should be structured in a subject-by-subject format. An introduction and a con ...

What is the difference between a significant deficiency and

What is the difference between a significant deficiency and a material weakness as it relates to internal Control? How does the presence of one material deficiency affect the auditor's report on internal controls under t ...

Assessment one - business research report proposal initial

Assessment One - Business Research Report Proposal: Initial Research Proposal The initial research proposal will consist of the following SIX (6) items: 1. Identify a business research topic 2. Define the research questi ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro