Calculate the present value ratio of the investment

Assignment Help Managerial Accounting
Reference no: EM132758330

Question - Cowboy Recording Studio is considering the investment of $138,300 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $20,500 per year for each year of its 7-year life and will have a salvage value of $14,500 at the end of its life. Cowboys's financial managers estimate that the firm's cost of capital is 8%.

Required -

1. Calculate the net present value of the investment.

2. Calculate the present value ratio of the investment.

3. What is the internal rate of return of this investment, relative to the cost of capital?

4. Calculate the payback period of the investment.

Reference no: EM132758330

Questions Cloud

Determine the approximate internal rate of return : BSU Inc. wants to purchase a new machine for $44,300, excluding $1,500 of installation costs. Determine the approximate internal rate of return
Discussing solutions in relation to management problem : Complete a paper discussing solutions in relation to the management problem(Woodman's markets) you are exploring during this course.
Make a synthesis about money market and capital market : Make a synthesis about money market and capital market and also indicate their different types of money market instruments as well as the different types
Do you think china is pursuing economic policy : Do you think China is pursuing an economic policy that can be characterized as neo-Mercantilist? Why or why not?
Calculate the present value ratio of the investment : Cowboy Recording Studio is considering the investment of $138,300 in a new recording equipment. Calculate the present value ratio of the investment
How does the fact that kohler has different divisions affect : Kohler Co. case study. There is a question of considering a DCF analysis. How does the fact that kohler has different divisions affect your analysis?
What is the net increase in cash for the year : A $87,625 increase in equipment, and a $115,960 decrease in notes payable. What is the net increase in cash for the year
What depreciation charges can it claim on the asset : Bernstein Tractor Company has just invested in new equipment costing $12,000. What depreciation charges can it claim on the asset
Calculate the cost of new common equity financing of stock q : Calculate the cost of new common equity financing of stock Q using Gordon Model. Round the answers to two decimal places in percentage form

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Manage budgets and financial plans

Explain the budgeting process and its importance to a business, identifying the components of different budgets, forecast estimates for inclusion in the budgets.

  Prepare a retained earnings statement

Prepare a retained earnings statement for the year and Prepare a stockholders' equity section of given case.

  Prepare a master budget for the three-month period

Prepare a master budget for the three-month period.

  Construct the companys direct labor budget

Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

  Evaluate the predetermined overhead rate

Evaluate the Predetermined Overhead Rate

  Determine the company''s bid

Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.

  Compute the pool rates for the different activities

Complete the schedule to compute the pool rates for the different activities.

  Prepare Company financial statements

Prepare Company financial statements

  Prepare an analysis of terracycles

This individual assignment is based on the TerraCycle Inc.

  Discuss the ethical issues

Discuss the ethical issues

  Political resources in emerging markets

Calculate the GDP in Income Approach  and Expenditure Approach

  Management accounting - ehsan electronics company

A new plant accountant suggested that the company may be able to assign support costs to products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd