Payback period computation

Exercise 25-1 Payback period computation; uneven cash flows LO P1

Beyer Company is considering the purchase of an asset for $360,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year.

 

  Year 1 Year 2 Year 3 Year 4 Year 5 Total
  Net cash flows   $ 80,000     $ 50,000     $ 70,000     $ 250,000     $ 13,000     $ 463,000  

 

 

Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your answers to 2 decimal places.)

 

A machine can be purchased for $210,000 and used for 5 years, yielding the following net incomes. In projecting net incomes, double-declining balance depreciation is applied, using a 5-year life and a zero salvage value.

 

  Year 1 Year 2 Year 3 Year 4 Year 5
  Net incomes   $ 13,000     $ 28,000     $ 53,000     $ 40,500     $ 103,000  

 

 

Compute the machine’s payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and payback period answer to 3 decimal places.)

 

Exercise 25-3 Payback period computation; even cash flows LO P1

Compute the payback period for each of these two separate investments:

 

 

a. A new operating system for an existing machine is expected to cost $240,000 and have a useful life of four years. The system yields an incremental after-tax income of $69,230 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $9,000.
b. A machine costs $180,000, has a $13,000 salvage value, is expected to last seven years, and will generate an after-tax income of $38,000 per year after straight-line depreciation.

 

Exercise 25-4 Accounting rate of return LO P2

 

A machine costs $300,000 and is expected to yield an after-tax net income of $9,000 each year. Management predicts this machine has a 9-year service life and a $60,000 salvage value, and it uses straight-line depreciation. Compute this machine’s accounting rate of return. (Round your answer to 2 decimal places.)

 

Exercise 25-5 Payback period and accounting rate of return on investment LO P1, P2

B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $480,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 192,000 units of the equipment’s product each year. The expected annual income related to this equipment follows.

 

 

       
  Sales $ 300,000  
  Costs      
    Materials, labor, and overhead (except depreciation)   160,000  
    Depreciation on new equipment   40,000  
    Selling and administrative expenses   30,000  
 
 
  Total costs and expenses   230,000  
 
 
  Pretax income   70,000  
  Income taxes (30%)   21,000  
 
 
  Net income $ 49,000  
 
 

Exercise 25-6 Computing net present value LO P3

B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $368,000 with a 4-year life and no salvage value. It will be depreciated on a straight-line basis. K2B Co. concludes that it must earn at least a 8% return on this investment. The company expects to sell 147,200 units of the equipment’s product each year. The expected annual income related to this equipment follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

LOOKING FOR THIS ASSIGNMENT OR A SIMILAR ONE? WE HAVE HAD A GOOD SUCCESS RATE ON THIS PAPER! ORDER WITH US TODAY FOR QUALITY WORK AND GET A DISCOUNT!

ORDER NOW

Disclaimer:

All types of paper that Discount Writers provides is only for the purpose of assistance! No text, paper, assignment, discussion would be similar with another student therefore guaranteeing Uniqueness and can be used with proper references only!

More tools: Better Grades: Choose your Homework Help:

Assignment Help: We would write your papers according to the instructions provided and guarantee you timely work

 

Entire Online Class Help: We are here for you and we would do your entire Class work from discussions, assignments, Replies, Exams and Quizzes at a Cost

 

Exam/ Quiz Help: We have a team of writers who specialize on exams from any specific field and we would give you an A+ Grade!

 

ORDER NOW