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Chicago Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: (Click the icon to view the savings in cash operating costs.) Chicago Cola uses a required rate of return of 14% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. 1. Net present value. (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) The net present value is Data table Requirements Calculate the following for the special purpose bottling machine: Year Amount 1. Net present value Year 1 $ 15,000 2. 3. Payback period Discounted payback period Year 2 11,000 4. Internal rate of return (using the interpolation method) Year 3 10,000 5. 8,000 Year 4 $ 44,000 Total Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation. Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.) Print Done Print Done

Chicago Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: (Click the icon to view the savings in cash operating costs.) Chicago Cola uses a required rate of return of 14% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. 1. Net present value. (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) The net present value is Data table Requirements Calculate the following for the special purpose bottling machine: Year Amount 1. Net present value Year 1 $ 15,000 2. 3. Payback period Discounted payback period Year 2 11,000 4. Internal rate of return (using the interpolation method) Year 3 10,000 5. 8,000 Year 4 $ 44,000 Total Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation. Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.) Print Done Print Done

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 9E: Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required:...
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Chicago Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: (Click the icon to view the savings in cash operating costs.) Chicago Cola uses a required rate of return of 14% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. 1. Net present value. (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) The net present value is Data table Requirements Calculate the following for the special purpose bottling machine: Year Amount 1. Net present value Year 1 $ 15,000 2. 3. Payback period Discounted payback period Year 2 11,000 4. Internal rate of return (using the interpolation method) Year 3 10,000 5. 8,000 Year 4 $ 44,000 Total Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation. Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.) Print Done Print Done
Transcribed Image Text:Chicago Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: (Click the icon to view the savings in cash operating costs.) Chicago Cola uses a required rate of return of 14% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. 1. Net present value. (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) The net present value is Data table Requirements Calculate the following for the special purpose bottling machine: Year Amount 1. Net present value Year 1 $ 15,000 2. 3. Payback period Discounted payback period Year 2 11,000 4. Internal rate of return (using the interpolation method) Year 3 10,000 5. 8,000 Year 4 $ 44,000 Total Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation. Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.) Print Done Print Done
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