Question : 51. In calculating the present value of an investment in equipment, : 1239664

51. In calculating the present value of an investment in equipment, the present value of the terminal residual value should be added to the cash inflows.  

52. The time expected to pass before the net cash flows from an investment would return its initial cost is called the amortization period.  

53. A company is considering purchasing a machine for $21,000.  The machine will generate income from operations of $2,000; annual cash flows from the machine will be $3,500.  The payback period for the new machine is 10.5 years.  

54. A company is considering purchasing a machine for $21,000.  The machine will generate income from operations of $2,000; annual cash flows from the machine will be $3,500.  The payback period for the new machine is 6 years.  

55. A company is considering the purchase of a new piece of equipment for $90,000.  Predicted annual cash inflows from the investment are $36,000 (year 1), $30,000 (year 2), $18,000 (year 3), $12,000 (year 4), and $6,000 (year 5).  The average income from operations over the 5-year life is $20,400.  The payback period is 3.5 years.  

56. A company is considering the purchase of a new machine for $48,000.  Management expects that the machine can produce sales of $16,000 each year for the next 10 years.  Expenses are expected to include direct materials, direct labor, and factory overhead totaling $8,000 per year plus depreciation of $4,000 per year.  All revenues and expenses except depreciation are on a cash basis.  The payback period for the machine is 6 years.  

57. A company is considering the purchase of a new machine for $48,000.  Management expects that the machine can produce sales of $16,000 each year for the next 10 years.  Expenses are expected to include direct materials, direct labor, and factory overhead totaling $8,000 per year plus depreciation of $4,000 per year.  All revenues and expenses except depreciation are on a cash basis.  The payback period for the machine is 12 years.  

58. A company is planning to purchase a machine that will cost $24,000, have a six-year life, and have no salvage value.  The company expects to sell the machine’s output of 3,000 units evenly throughout each year. Total income over the life of the machine is estimated to be $12,000.  The machine will generate cash flows per year of $6,000.  The payback period for the machine is 4 years.  

59. A company is planning to purchase a machine that will cost $24,000, have a six-year life, and have no salvage value.  The company expects to sell the machine’s output of 3,000 units evenly throughout each year. Total income over the life of the machine is estimated to be $12,000.  The machine will generate cash flows per year of $6,000.  The payback period for the machine is 12 years.  

60. A company is planning to purchase a machine that will cost $24,000, have a six-year life, and have no salvage value.  The company expects to sell the machine’s output of 3,000 units evenly throughout each year. Total income over the life of the machine is estimated to be $12,000.  The machine will generate cash flows per year of $6,000.  The accounting rate of return for the machine is 16.7%.