Question :
113.A machine costs $180,000 and will have an eight-year life, : 1236807
113.A machine costs $180,000 and will have an eight-year life, a $20,000 salvage value, and straight-line depreciation is used. Management estimates the machine will yield an after-tax net income of $12,500 each year. Compute the accounting rate of return for the investment.
A.12.5%.
B.26.8%.
C.11.8%.
D.10.8%.
E.22.5%.
114.Poe Company is considering the purchase of new equipment costing $80,000. The projected annual cash inflows are $30,200, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine.
10.90910.9091
20.82641.7355
30.75132.4869
40.68303.1699
A.$(15,731).
B.$(4,896).
C.$15,731.
D.$4,896.
E.$32,334.
115.Poe Company is considering the purchase of new equipment costing $80,000. The projected net cash flows are $35,000 for the first two years and $30,000 for years three and four. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine.
10.90910.9091
20.82641.7355
30.75132.4869
40.68303.1699
A.$(15,731).
B.$(4,896).
C.$15,731.
D.$4,896.
E.$23,775.
116.Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Compute the break-even time (BET) period for this investment. (Round to two decimal places.)
Annual Net Cash FlowsPresent Value of 1 at 10%
Year 01.0000
Year 1$40,000.9091
Year 2$40,000.8264
Year 3$35,000.7513
Year 4$35,000.6830
Year 5$30,000.6209
A.2.85 years.
B.2.57 years.
C.3.17 years.
D.2.98 years.
E.3.62 years.
117.Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,050,000 and the variable costs were $860,000. The fixed costs of the division were $193,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
A.$57,900 decrease
B.$132,100 decrease
C.$54,900 decrease
D.$190,000 increase
E.$190,000 decrease
118.Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,000. The division sales for the year were $960,000 and the variable costs were $475,000. The fixed costs of the division were $527,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield’s operating income for eliminating this business segment would be:
A.$485,000 decrease
B.$210,800 increase
C.$274,200 decrease
D.$485,000 increase
E.$274,200 increase
119.Granfield Company has a piece of manufacturing equipment with a book value of $40,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $22,000. Granfield can purchase a new machine for $120,000 and receive $22,000 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $19,000 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:
A.$22,000 decrease
B.$76,000 increase
C.$18,000 decrease
D.$52,000 increase
E.$22,000 increase
