1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
eimsori [14]
2 years ago
15

(Present value tables are needed.) Miami Marine Enterprises is evaluating the purchase of an elaborate hydraulic lift system for

all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. The B14 model is considered to be riskier than the F54 model so the rate of return required for it is higher. Financial data about the twochoices follows.
B14 Model F54 Model
Investment $ 320,000 $ 240,000
Useful life (years) 8 8
Estimated annual net cash inflows for useful life $ 75,000 $ 40,000
Residual value $ 30,000 $ 10,000
Depreciation method Straight-line Straight-line
Required rate of return 14% 10%

What is the total present value of future cash inflows and residual value from the B14 Model?

A. $218,070
B. $410,655
C. $358,455
D. $38,455
Business
1 answer:
amm18122 years ago
8 0

Answer:

C. $358,455

Explanation:

As per given data

                                                           B14 Model    F54 Model

Investment                                         $320,000    $240,000

Useful life (years)                                      8                 8

Estimated annual net cash inflows   $75,000      $40,000

Residual value                                    $30,000     $10,000

Depreciation method Straight-line Straight-line

Required rate of return                        14%                10%

Net Present value of the net cash inflows can be calculated by using the formula of present value of annuity because the cash inflows of each year are constant cash flows.

Present value of Annuity = P x [ ( 1 - ( 1 + r )^-n ) / r ]

Where

P = Annual cash inflows = $75,000

r = required rate of return = 14%

n = numbers of periods = 8 years

Placing values in the formula

Present value of cash inflows = $75,000 x [ ( 1 - ( 1 + 14% )^-8 ) / 14% ]

Present value of cash inflows = $347,915

Present value of residual value of asset can be calculated by discounting the residual value using required rate of return.

Formula for Discounting

Present value = P (1 + r)^-n

Where

P = Value to be discounted = $30,000

r = required rate of return = 14%

n - numbers of periods = 8 years

Placing values in the formula

Present value of residual value = $30,000 x ( 1 + 14% )^-8 = $10,517

Total Present value = $10,517 + 347,915 = 358,432

There is a difference due to the rounding effect in the calculations, the closest value id C. $358,455

You might be interested in
Prioritization is an example of a skill that helps you reach long term goals because...
lukranit [14]
It helps you stay organized and determined. It’s scientifically proven that we can’t multitask, effectively at the very least. So when you really consider what is most important to you at any given moment, it will help you succeed because chances are if you like what you are doing you are more likely to do well at it.
6 0
3 years ago
The ______ period rate of return is simply the rate of return over some arbitrary investment period.
sdas [7]

Answer: holding

Explanation:

6 0
2 years ago
Digital designers need what kind of skills:
artcher [175]

Answer:

C. Communication skills

3 0
3 years ago
Read 2 more answers
Why do employers prefer employees with good work ethics? A. because an employee with good work ethics will always be a team play
ivann1987 [24]

D. because an employee with good work ethics can prove to be an efficient resource overall ( because its common sense)

5 0
3 years ago
Anderson Compounds produces two industrial chemical compounds, Gorp and Gumm, from the same process, which last year, cost $480,
Olin [163]

Answer:

b. 320000

Explanation:

In order to calculate the joint cost of Gorp we need to understand what the method means and how it's used to calculate it. The adjusted sales method is used to allocate joint costs based on the prices the products are sold.

First of all we need to calculate the percentage of Selling price of Gorp to that of the total selling price of both Gorp and Gumm.

I.e: 60 ÷ (60+30) × 100

SP % of Gorp= 66.67%

Now we calculate joint cost allocated to Gorp.

Total joint cost of both Gorp and Gumm = $480000

Joint cost of Gorp = $480000 × 66.67%

Joint cost of Gorp = $320,000

3 0
3 years ago
Other questions:
  • Instead of offering the same benefit package to every employee, cassandra's company allows her to choose whether she wants day c
    6·1 answer
  • A company is trying to systematically improve processes by eliminating non-conformity of their products to product specification
    14·1 answer
  • The story of how prilosec otc successfully used sponsorship of bunco gaming, in particular the bunco world championship illustra
    13·1 answer
  • Which of the following statements is CORRECT?
    13·1 answer
  • Do you think the study of Financial Accounting can help you in running your business? Why?​
    6·1 answer
  • An entrepreneur can best be characterized as someone who
    7·2 answers
  • Your company has net sales revenue of $50 million during the year. At the beginning of the year, fixed assets are $22 million. A
    12·1 answer
  • The liquidity coverage ratio, which is measured under the Basel III guidelines, is the ratio of a bank's _________ to its ______
    12·1 answer
  • today is the day before 4th of july holiday and the fireworks stands is almost out of fireworks what will happen to the price of
    13·1 answer
  • Hal charges Jim to operate his business within the office building he owns. Identify Hal's source of income
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!