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Liberty ACCT 212 Chapter 11 Homework Answers Complete Solutions
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Question 1
Beyer Company is considering the purchase of an asset for $190,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year.
Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal place.)
Question 2
Beyer Company is considering the purchase of an asset for $210,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 15% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
a. Compute the net present value of this investment. (Round your answers to the nearest whole dollar.)
b. Should Beyer accept the investment?
Question 3
A machine can be purchased for $120,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied using a five-year life and a zero salvage value.
Compute the machine’s payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places.)
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Question 4
A machine can be purchased for $233,000 and used for five years, yielding the following net incomes. In projecting net incomes, double-declining depreciation is applied using a five-year life and a zero salvage value.
Compute the machine’s payback period (ignore taxes). (Round payback period answer to 3 decimal places.)
Question 5
a. A new operating system for an existing machine is expected to cost $590,000 and have a useful life of six years. The system yields an incremental after-tax income of $175,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $23,200.
b. A machine costs $580,000, has a $26,300 salvage value, is expected to last eight years, and will generate an after-tax income of $78,000 per year after straight-line depreciation.
Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Question 6
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $168,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 67,200 units of the equipment’s product each year. The expected annual income related to this equipment follows.
1. Compute the payback period.
2. Compute the accounting rate of return for this equipment.
Question 7
If at least an 9% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
