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

Key information for the plant city divisionkey information

Key Information For The Plant City Division Key information for the Plant City Division (PCD) of Barkley Industries for 2015 are as follows: Revenues $15,000,000 Operating Income 1,800,000 Total Assets 10,000,000 PCD man ...

Niagular corp just reported a net income of 8500000 amp its

Niagular Corp. just reported a net income of $8,500,000 & its current stock price is $25.75 per share. Niagular Corp. is forecasting an increase of 25% for its net income next year, but it also expects it will have to is ...

Problemin an annual audit on december 31 2016 novelty

Problem In an annual audit on December 31, 2016, Novelty company provided the following transactions: 1. Merchandise was received on January 8, 2017, and related purchase invoice recorded on January 5, 2017. The invoice ...

International accountingpart 1the weeks discussion covered

INTERNATIONAL ACCOUNTING PART 1 The week's discussion covered the following International Accounting Standards (IAS): #21 The Effects of Changes in Foreign Exchange Rates #27 Consolidated and Separate Financial Statement ...

1 what does it mean to create a culture of honesty openness

1. What does it mean to create a "Culture of Honesty, Openness, and Assistance?" Give some examples from an organization with which you have been affiliated. (250 words) 2. Review the section Preventing Fraud-A Sumary an ...

Company annual report studychoose any company and make a

COMPANY ANNUAL REPORT STUDY Choose any company and make a report on financial report of company: David Jones Introduction (about 100 words) Conceptual framework (200 words) Critical analysis (200 words) Ethics (not more ...

This assignment will assess the following learning

This assignment will assess the following learning outcomes: - Demonstrate the impact on the financial statements and the implication for different users of accounts of alternative ways of treating controversial accounti ...

Problem 1 mat Problem 1 Mat. Date Rate(%) 1/15/2017 0.5 4/15/2017 0.6 7/15/2017 0.75

Problem 1 Mat. Date Rate(%) 1/15/2017 0.5 4/15/2017 0.6 7/15/2017 0.75 10/15/2017 1.0 1/15/2018 1.25 4/15/2018 1.5 7/15/2018 1.75 10/15/2018 2.0 1/15/2019 2.1 4/15/2019 2.2 7/15/2019 2.3 10/15/2019 2.4 Table 1: Continuou ...

Accounting assignmentplease include all calculationswork

Accounting Assignment Please include all calculations/work necessary. Please show references and in-text citing where needed. Please answer all questions in full. No plagiarism. For the eActivity, research one publicly t ...

Review the short list of account balances from data below

Review the short list of account balances from data below. From the account balances, generate an income statement, a statement of owner's equity and a balance sheet for a hypothetical small business. The adjusted trial ...

  • 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