Click here to view Exhibit 8B 1 to determine the appropriate discount factors

Click here to view exhibit 8b 1 to determine the

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Click here to view Exhibit 8B-1 to determine the appropriate discount factor(s) using tables. Management is having di culty estimating the salvage value of the aircraft. How large would the salvage value of the aircraft have to be to make the investment in the aircraft fi nancially attractive? (Round your fi nal answer to the nearest dollar amount.) fi nal answer to the nearest dollar amount.) $86,958 $579,721 $1,541,811 $3,864,807 Minimum salvage value = Negative net present value to the offset ÷ Present value factor = $579,721 ÷ 0.376 = $1,541,811 References Multiple Choice Learning Objective: 08-03 Evaluate an investment project that has uncertain cash ows. (Ignore income taxes in this problem.) Deibel Corporation is considering a project that would require an investment of $62,000. No other cash out ows would be involved. The present value of the cash in ows would be $77,500. The pro fi tability index of the project is closest to: (Round your answer to 2 decimal (Round your answer to 2 decimal places.) places.) 0.25 0.20 0.75 1.25 Project A Investment required (a) $(62,000) Present value of cash in ows 77,500 Net present value (b) $15,500 Project pro fi tability index (b) ÷ (a) 0.25 References Multiple Choice Learning Objective: 08-04 Rank investment projects in order of preference. T T U I T T U I T T T T
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99. Award: 0 out of 1.00 point 0 out of 1.00 point 100. Award: 0 out of 1.00 point 0 out of 1.00 point (Ignore income taxes in this problem.) The Jackson Company has invested in a machine that cost $92,000, that has a useful life of sixteen years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of eight years. Given these data, the simple rate of return on the machine is closest to: (Round your answer to 1 decimal place.) to 1 decimal place.) 2.7% 3.8% 6.3% 18.8% Annual incremental cost savings* $11,500 Annual incremental expenses: Annual depreciation ($92,000 $0)/16 $5,750 5,750 Annual incremental net operating income $5,750 *Payback period = Investment required ÷ Annual net cash in ow 8 years = $92,000 ÷ Annual net cash in ow Annual net cash in ow = $92,000 ÷ 8 years = $11,500 yearly cash ow Simple rate of return = Annual incremental net operating income ÷ Initial investment = $5,750 ÷ $92,000 = 6.3% References Multiple Choice Learning Objective: 08-05 Determine the payback period for an investment. Learning Objective: 08-06 Compute the simple rate of return for an investment. (Ignore income taxes in this problem.) The Higgins Company has just purchased a piece of equipment at a cost of $100,000. This equipment will reduce operating costs by $60,000 each year for the next six years. This equipment replaces old equipment which was sold for $10,000 cash. The new equipment has a payback period of: (Round your answer to 1 decimal place.) (Round your answer to 1 decimal place.) 1.7 years 1.5 years 6.0 years 7.5 years Payback period = Investment required ÷ Annual net cash in ow = ($100,000 $10,000) ÷ $60,000 per year = 1.5 years References Multiple Choice Learning Objective: 08-05 Determine the payback period for an investment.
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