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marta [7]
3 years ago
14

BSU Inc. wants to purchase a new machine for $40,070, excluding $1,200 of installation costs. The old machine was bought five ye

ars ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $8,500 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value. Click here to view PV table.
(a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period years
(b) Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return (c) Assuming the company has a required rate of return of 7%, determine whether the new machine should be purchased. The investment be accepted.
Business
1 answer:
myrzilka [38]3 years ago
3 0

Answer:

4.62  years

8.02%

Explanation:

The payback period is the number of years it would take the investment to recoup itself.

Payback=initial capital outlay/annual cash flow

initial capital outlay is the cost of the new  machine plus installation cost minus the salvage value of the old machine.

initial capital outlay=$40,070+$1,200-$2,000=$ 39,270.00

Annual cash flow is the reduction in operating costs of $8,500 per year

payback =$ 39,270.00/$8,500.00=4.62  years

The internal rate of return is computed in the attached

 

Download xlsx
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Alpaca Corporation had revenues of $300,000 in its first year of operations. The company has not collected on $20,000 of its sal
madam [21]

Answer: Option (b) is correct.

Explanation:

Given that,

Revenues = $300,000

Merchandise it purchased = $75,000

Salaries paid = $14,000

Owners invested = $23,000

Borrowed on a five-year note = $23,000

Interest paid = $3,000

Paid for a two-year insurance policy = $6,800

Income tax rate = 9%

Gross Margin = Revenues - Cost of Goods Sold

                       = $300,000 - $75,000

                       = $225,000

Profit before tax = Gross Margin - Salaries - Insurance payment - Interest

                          = $225,000 - 14,000 - 3,400 - 3,000

                          = $204,600

Net Income = Profit before tax - Tax at 9%

                    = $204,600 - 18,414

                    = $186,186

6 0
3 years ago
A map made to show the distribution of one or more phenomenon is a(n) ________ map.
Vaselesa [24]
<span>A map made to show the distribution of one or more phenomenon is a THEMATIC map. A thematic map emphasizes a distinct characteristic over the map, showing which regions are more susceptible to it.</span>
7 0
3 years ago
If the expected path of 1-year interest rates over the next five years is 2 percent, 4 percent, 1 percent, 4 percent, and 3 perc
timofeeve [1]

Answer:A) one year

Explanation: The unbiased expectations theory, also known as the expectation theory aims to estimate how much the short term interest rates will amount to in future. This is based on long term interest rates. Forward rates are used to predict the value of interests in the future based on the values calculated today. A maturity of 1 year has the lowest interest rate because it is not given enough time to grow. Interest rates tend to grow better over a longer period of time. Therefore in terms of expectation theory the longer the maturity the better the chances of interest rate growth.

6 0
3 years ago
Pacific Packaging's ROE last year was only 6%; but its management has developed a new operating plan that calls for a debt-to-ca
Flura [38]

Answer:

36%

Explanation:

For the computation of the company's return on equity first we need to follow some steps which is shown below:-

Step 1

Earnings before tax = EBIT - Interest

= $452,000 - $152,000

= $300,000

Step 2

Earnings after interest and taxes = Earnings before tax - Tax

= $300,000 - ($300,000 × 40%)

= $300,000 - $120,000

= $180,000

Step 3

Asset turnover ratio = Total revenue ÷ Total assets

3.6 = $4,000,000 ÷ Total assets

Total assets = $1,111,111.11

Step 4

Equity ratio = 1 - Debt ratio

= 1 - 0.55

= 0.45

Step 5

Total Equity = Equity ratio × Total assets

= 0.45 × $1,111,111.11

= $500,000

and finally

Return on Equity = Net income ÷ Equity

= $180,000 ÷ $500,000

= 0.36

or

= 36%

3 0
3 years ago
What are the pros and cons of using social media in the workplace? List 3 Each
Dahasolnce [82]

Answer:

pros

Recruit/source potential candidates

Corporate brand awareness/ employer branding

Brand ambassadors and increased engagement

Low cost investment

Ability to reach a wide audience

Targeted marketing

Networking capabilities

Ability to conduct research and focus groups

Training and Development

cons:

Decreased productivity/ lack of focus

Security and privacy concerns

Inappropriate online behavior

Brand reputation risks

Explanation:

4 0
3 years ago
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