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

  Evaluate what is the direct materials quantity variance

During February, Wissota Co. paid $57,220 for 4,840 pounds, which were all used to produce 2,400 units. What is the direct materials quantity variance?

  What would be the club roi

Net operating income increases by $25,600. Further assume that this is possible without any increase in operating assets. What would be the club's ROI?

  When actual daily grade deviated from expectation

When your actual daily grade deviated from your expectation. What did you do to manage the difference in expectation? (Variance analysis) Explain in detail.

  What information would want to collect

If you were in charge of these decisions, what information would you want to collect? Keeping or eliminating operations - In 2015, Yum! Brands, Inc.

  Determine what is the purpose of the nces

Determine What is the purpose of the NCES? How many schools are in the district? How many students? What is the student-teacher ratio?

  Assess capital planning proposition

Research the different quantitative models used to assess capital planning proposition.

  Prepare and make an income statement

Prepare and Make an income statement. The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $725,000

  Prepare the journal entries on december and june

Frye paid the amount previously written off. Instructions Prepare the journal entries on December 31,2010,May 11,2011,and June 12,2011.

  What are the responsibility income statements

Identify and discuss briefly the two concepts generally used in assigning costs to responsibility centers of a business. Responsibility income statements

  Compute the cost of a single unit of product

Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.

  What is full absorption cost of the opening finished goods

What is the full absorption cost of the opening finished goods inventory? and how can use it to make budget sheet? any example?

  What is the fixed overhead spending variance

What is the fixed overhead spending variance? H&X Co. uses a standard job cost system with a normal capacity of 26,700 direct labour hours. H&X Co.

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