Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yield the following net cash flows. Management requires a 9% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year 1 2 2345 Net cash Flow $ 47,700 54,000 76,400 94,400 126,700 Required: 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. 4. Should management invest in this project based on net present value? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the net present value for this investment. Net present value Required 2 Required 4 >

Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yield the following net cash flows. Management requires a 9% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year 1 2 2345 Net cash Flow $ 47,700 54,000 76,400 94,400 126,700 Required: 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. 4. Should management invest in this project based on net present value? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the net present value for this investment. Net present value Required 2 Required 4 >

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...

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Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.
Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?
Salsa Company is considering an investment in technology to improve its operations. The investment costs $243,000 and will yield the following net cash flows. Management requires a 9% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year 1 2 3 4 5 Net cash Flow $ 47,700 52,500 75,900 95,800 125,800 Required: 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. 4. Should management invest in this project based on net present value? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the payback period for this investment. Note: Enter cash outflows with a minus sign. Round your Payback Period answer to 1 decimal place. Cumulative Net Cash Year Net Cash Flows Flows Initial investment $ (243,000) $ (243,000) Year 1 47,700 Year 2 52,500…
Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yield the following net cash flows. Management requires a 7% return on Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year Net cash Flow 1 $ 48,400 2 52,500 3 76,200 4 94,700 5 125,100 Required: 1. Determine the payback period for this Investment. 2. Determine the break-even time for this Investment. 3. Determine the net present value for this Investment. 4. Should management invest in this project based on net present value? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the break-even time for this investment. (Enter cash outflows with a minus sign. Round your break-even time answer to 1 decimal place.) 1 at 7% Year Net Cash Flows Present Value of Present Value of Net Cash Flows per Year Initial investment $ (250,000) Year 1…
Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yield the following net cash flows. Management requires a 9% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 2 3 4 5 Net cash Flow $ 47,900 53,700 75,600 95,500 126, 200 Required: 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. 4. Should management invest in this project based on net present value? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the payback period for this investment. (Enter cash outflows with a minus sign. Round your Payback Period answer to 1 decimal place.) Year Initial investment Year 1 Year 2 Year 3 Year 4 Year 5 Payback period = Net Cash Flows $ (250,000) 47,900 53,700 75,600…
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Salsa Company is considering an investment in technology to improve its operations. The investment costs $241,000 and will yield the following net cash flows. Management requires a 10% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year Net cash Flow 1 $ 48, 200 2 53,900 3 76, 400 4 95,500 5 126,500 Required: Determine the payback period for this investment. Determine the break - even time for this investment. Determine the net present value for this investment. Should management invest in this project based on net present value?
Gonzalez Company is considering two new projects with the following net cash flows. The company’s required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year Net Cash Flows Project 1 Project 2 Initial investment $(46,000) $(74,000) 1. 11,500 35,000 2. 25,900 20,000 3. 21,500 25,000 Compute payback period for each project. Based on payback period, which project is preferred? Compute net present value for each project. Based on net present value, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute payback period for each project. Based on payback period, which project is preferred?Note: Cumulative net cash outflows must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places.…
A company is considering a $168,000 investment in machinery with the following net cash flows. The company requires a 10% 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.) Net Cash Flow (a) Compute the net present value of this investment. (b) Should the machinery be purchased? Year Year 11 Year 2 Year 1 $10,000 Complete this question by entering your answers in the tabs below. Year 3 Year 4 Year 5 Totals Initial investment Net present value Required A Required B Compute the net present value of this investment. (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) Year 2 $29,000 Net Cash Flows $ 0 Present Value Factor Year 3 $55,000 Present Value of Net Cash Flows $ $ Required A Year, 4 $42,000 0 0 Year 5 $113,000 Required >
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