Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Q1) Prince Company's required rate of return is 10%. Company is thinking of buying of three machines, as given below. Consider each machine independently.

Required:

a. Machine A will cost= $25,000 and have a life of 15 years. Its salvage value will be $1,000, and cost savings are projected at $3,500 per year. find out machine's net present value.

b. How much will Prince Company be eager to pay for Machine B if machine promises annual cash inflows of $5,000 per year for 8 years?

c. Machine C has projected life of 10 years. Determine machine's internal rate of return, to the nearest whole percent, if it costs $30,000 and will save $6,000 annually in cash operating costs? Would you suggest  purchase? Describe. 

$1,860

 a
  Year
Amount
10% Factor
Present Value
  Investment required
now
($25,000)
1
($25,000)
  Annual cost savings
1-15
$3,500
7.606
26,621
  Salvage value
15
$1,000
0.239
239
  Net present value
      $1,860
b
  Year
Amount
10% Factor
Present Value
  Annual cash inflows
1-8
$5,000
5.335
$26,675

As present value of cash inflows is $26,675, company should be eager to pay up to this amount to acquire machine.

c. Investment required + Net annual cash flow = Factor of internal rate of return

$30,000 + $6,000 = 5.000
To nearest whole percent, internal rate of return is 15%.

Machine should be bought, as internal rate of return is greater than required rate of return.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919593

Have any Question? 


Related Questions in Accounting Basics

Assignmentpaper 1excel spreadsheet and 1-2 pagesconsider

Assignment Paper #1 Excel Spreadsheet and 1-2 pages Consider the following scenario: Andre has asked you to evaluate his business, Andre's Hair Styling. Andre has five barbers working for him. (Andre is not one of them.) ...

Indeed it can be said that newspapers are facing tough

Indeed it can be said that newspapers are facing tough times, and yes, the Internet can offer many things that papers cannot. Even so, the death of newspapers has been predicted by many for decades. Radio, TV and now the ...

Kent cpa is a staff auditor participating in the audit

Kent, CPA is a staff auditor participating in the audit engagement of Fort, Inc. Based upon each of the circumstances below, indicate whether or not Kent's actions impair his independence. Explain your response for each ...

You are starting your own internet business you decide to

You are starting your own Internet business. You decide to form a company that will sell cookbooks online. Justcookbooks.com is scheduled to launch 6 months from today. You estimate that the annual cost of this business ...

Review the provisions of the sarbanes-oxley act of 2002 to

Review the provisions of the Sarbanes-Oxley Act of 2002 to address the accounting scandals in the late 1990s and early 2000s (Enron, WorldCom, etc.). Identify the provisions that you believe made the most significant imp ...

Question 1the collection on an account within the 110 n30

Question 1 The collection on an account within the 1/10 n/30 discount period was recorded using a 10% discount rather than a 1% discount in both the controlling and subsidiary accounts. This error will cause the A. the n ...

Q1 what was the logic behind the gentiles who asked for

Q.1 what was the logic behind the gentiles who asked for chanja Finkelsztjains world goods( and similar anecdotes) Q.2 how does the author regard the plundering of the Jews? Q.3 Why did so many Jews leave valuables with ...

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 ...

Internal control procedures are required for all

Internal control procedures are required for all transaction cycles within an accounting cycle. This week you are addressing the control procedures that would be the most effective in the general ledger and reporting sys ...

In your own words explain the recording process and the

In your own words, explain the recording process and the accounting equation to someone who has no accounting experience. Then, give your opinion on the elements or areas that might cause the most confusion or be the mos ...

  • 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