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sladkih [1.3K]
3 years ago
10

The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate

of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability:
Year Income from Operations Nat cash flow
1 $100,000 40,000
2 40,000 10,000
3 10,000 120,000
4 100,000 90,000
5 120,000 180,000

The cash payback period for this investment is ______.
Business
1 answer:
ankoles [38]3 years ago
6 0

Answer:

The payback period is more than 5 years

Explanation:

Net present value is the Net value of all cash inflows and outflows in present value term. All the cash flows are discounted using a required rate of return.

Year  Cash flow    PV factor   Present Value

0       ($490,000)       1              ($490,000)

1         $40,000       0.909         $36,360

2        $10,000        0.826         $8,260

3        $120,000      0.751          $90,120

4        $90,000       0.683         $61,470

5        $180,000      0.621        <u> $111,780 </u>

Net Present Value                   ($182,010)

NPV of this Investment is negative so, it is not acceptable.  

Payback period

Total Net cash inflow of the investment is $440,000 and Initial investment is $490,000. This investment will take more than 5 years to payback the initial investment.

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6 0
2 years ago
Tim wrote a negotiable note. Subsequently, Tim's debts were discharged in bankruptcy. If a holder in due course presents the not
fomenos

Answer:

TRUE

Explanation:

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Therefore, the following situation is TRUE .

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Valley spa purchased $7,800 in plumbing components from tubman co. valley spa signed a 60-day, 10% promissory note for $7,800. i
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Answer:

The journal entry is given as follows;

Explanation:

Accounts Receivable-Valley Spa           Dr.$7,930

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8 0
3 years ago
If consumers see a measurable increase in the price of coffee, they are likely to change their consumption to less expensive tea
erica [24]

Answer: Utility function .

Explanation: In economics and particularly in consumer choice theory, the substitution effect is one component of the effect of a change in the price of a good upon the amount of that good demanded by a consumer, the other being the income effect .

utility function is an important concept that measures preferences over a set of goods and services. Utility represents the satisfaction that consumers receive for choosing and consuming a product or service. Utility is measured in units called utils, but calculating the benefit or satisfaction that consumers receive from is abstract and difficult to pinpoint. As a result, economists measure utility in terms of revealed preferences by observing consumers' choices. From there, economists create an ordering of consumption baskets from least desired to the most preferred.

utility function measures the welfare or satisfaction of a consumer as a function of consumption of real goods such as food or clothing. Utility function is widely used in the rational choice theory to analyze human behavior.

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Economists take the utility-function concept one step farther by assigning a numerical value to the products that consumers choose or choose not to consume. Assigning a value of utility is called cardinal utility, and the metric used to it is called utils.

For example, in certain situations, tea and coffee can be considered perfect substitutes for each other, and the appropriate utility function must reflect such preferences with a utility form of u(c, t) = c + t, where "u" denotes the utility function and "c" and "t" denote coffee and tea. Economists might conclude that a consumer who consumes one pound of coffee and no tea derives a utility of 1 util.

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