Busy beaver corp is interested in reviewing its method of

Assignment Help Accounting Basics

Reference no: EM13582503

Busy Beaver Corp. is interested in reviewing its method of evaluating capital expenditure proposals using the accounting rate of return method. A recent proposal involved a $50,000 investment in a machine that had an estimated useful life of five years and an estimated salvage value of $10,000. The machine was expected to increase net income (and cash flows) before depreciation expense by $15,000 per year. The criteria for approving a new investment are that it have a rate of return of 16% and a payback period of three years or less.

Requirement 1:

(a)Calculate the accounting rate of return on this investment for the first year. Assume straight-line depreciation. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)Accounting rate of return %

(b) Based on this analysis, would the investment be made?

Requirement 2:(a) Calculate the payback period for this investment. (Round your answer to 2 decimal places.)

(b) Based on this analysis, would the investment be made?

Requirement 3:

(a)Using Table 6-4, calculate the net present value of this investment using a cost of capital of 16%. (Round pv factor to 4 decimal places, intermediate calculations and final answer to the nearest dollar amount. Omit the "tiny_mce_markerquot; sign in your response.)

Net present value $
(b) Based on this analysis, would the investment be made?

Reference no: EM13582503

Questions Cloud

Aaa lock manufacturing co makes and sells several models of : aaa lock manufacturing co. makes and sells several models of locks. the cost records for the zforce lock show that

Prepare a complete depreciation table under the 200 percent : on january 2 2015 jatson corporation acquired a new machine with an estimated useful life of five years. the cost of

What is the labor productivity per labor-hour for these : lillian fok is president of lakefront manufacturing a producer of bicycle tires. fok makes 1000 tires per day with the

Mizzou mining company mines an iron ore called alpha during : mizzou mining company mines an iron ore called alpha. during the month of december 400000 tons of alpha were mined and

Busy beaver corp is interested in reviewing its method of : busy beaver corp. is interested in reviewing its method of evaluating capital expenditure proposals using the

If the bakery makes 1500 loaves per month with a labor : charles lackey operates a bakery in idaho falls idaho. because of its excellent product and excellent location demand

Find the 95 confidence interval for the standard deviation : q1. find the 95 confidence interval for the standard deviation of the diameter of oranges if a sample of 47 oranges

Ironwood corporation has ordinary taxable income of 40000 : 1. which of the following items would be includable in the gross income of the recipient?a. insurance payments for

For the stamping department of a manufacturing firm the : for the stamping department of a manufacturing firm the standard cost for direct labor is 12 per hour and the

User Account

All Pages