Based on the net present value

Assignment Help Financial Accounting

Reference no: EM131212874

Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12–11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset will cost $210,000, and it will produce earnings before depreciation and taxes of $68,000 per year for three years, and then $31,000 a year for seven more years. The firm has a tax rate of 35 percent. Assume the cost of capital is 13 percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12–12. UseAppendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. blo61612_app_A-A8.pdf

a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Net present value $

b. Based on the net present value, should Universal Electronics purchase the asset?

Yes

Reference no: EM131212874

Questions Cloud

Materials price variance is computed as difference between : A materials price variance is computed as the difference between

Paid the interest on loan but has not yet paid any principal : Birch Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, James, who has operated it as an S corporation since its inception. Last year, James made a direct loan to Birch Corp. in the amount of $7,050. Birch Corp. ..

Evaluate financial ratios and cash flow measures of verizon : Analyze and evaluate the financial ratios and cash flow measures of Verizon (the phone company) relative to its historical performance. For purposes of this project, a two-year reflection is sufficient. You should use at least 10 of the ratios includ..

Compute the degree of operating leverage for each company : Compute the degree of operating leverage for each company. Assume that sales revenue decreases by 20%. Prepare a CVP income statement for each company.

Based on the net present value : Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12–11 to determine in what depreciation category the asset falls. Calculate the net p..

Employees produce legitimate documentation for nonbusiness : Employees who cheat on their expense accounts usually do so by one of four methods: Mischaracterized expenses. Employees produce legitimate documentation for nonbusiness-related transactions. Example: taking a friend to dinner and charging it to the ..

Paid by the employer in accordance with the adoption plan : Chad and Jaqueline are married and have AGI of? $150,000. In 2015 they adopted a? child, while taking advantage of their? employer's written adoption assistance program. The adoption cost? $9,500, all of which was paid by the employer in accordance w..

Balance sheet for salary and payroll taxes are : Beau Brentley earned $60,000 in 2009 from his job at Bridgestone Tires. He had 15% of his gross pay withheld for federal income taxes, 6.2% withheld for FICA Social Security taxes, and 1.45% withheld for Medicare taxes. Assuming Beau is not paid anyt..

Accounts receivable management : Examine the five (5) steps to managing accounts receivable. Speculate on the step that is most vulnerable to fraud. Suggest at least two (2) actions that a company can take in order to protect this step from fraud. Determine to whom to extend credit...

User Account

All Pages