Calculate the return on average investment

Assignment Help Managerial Accounting
Reference no: EM132758054

High Point Eyes, a nonpro?t organization, estimates that it can save $25,000 a year in cash operating costs for the next 12 years if it buys a special-purpose eye-testing machine at a cost of $120,000. A $5,000 disposal value is expected. High Point Eyes' required rate of return is 10%. Assume all cash ?ows occur at year-end except for initial investment amounts. High Point Eyes uses straight-line depreciation. The income tax rate is 30% for all transactions that affect income taxes.

Required:

Problem 1. Calculate the following for the special-purpose eye-testing machine: a. Net present value b. Payback period c. Return on average investment

Problem 2. What other factors should High Point Eyes consider in deciding whether to purchase the special-purpose eye-testing machine?

Reference no: EM132758054

Questions Cloud

What is the discount rate of the stock : XYZ Inc. has expected earnings over the next year of $2/share (E1 = 2). The company is expected to maintain an earnings retention rate of 40%.
How would you make an arbitrage profit : How would you make an arbitrage profit if the coupon bond was trading at $100? How much arbitrage profit would you make per $100 of the 3-year coupon bond trade
Evaluate the contribution of information systems : Explain and evaluate the contribution of information systems to procurement and supply chain efficiency in chosen organisations.
Calculate holding period return : Assuming yields to maturity on comparable bonds remain at 7%, calculate your holding period return if you sell the bond after two years
Calculate the return on average investment : Calculate the following for the special-purpose eye-testing machine: Net present value. Payback period. Return on average investment
What is the projects internal rate of return irr : A project that costs $2,900 to install will provide annual cash flows of $790 for each of the next 6 years. Calculate the NPV if the opportunity cost of capital
Compute the price-earnings ratio and dividend yield : Compute the price-earnings ratio and dividend yield for the three companies. Round ratios and percentages to one decimal place as appropriate
Is this evidence against market efficiency : The closing price of the company at the end of the day is up 5% from yesterday. Is this evidence against market efficiency? Explain.
Culture is powerful component of organization success : Culture is a powerful component of an organization's success. Culture differs across organizations.

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Briefly explain the operation of process costing

Briefly explain the operation of process costing, including the way the unit costs of finished goods are determined. how manager will use the information obtain

  What advantages can you see to offset this disadvantage

What appears to be the major disadvantage of using normal activity rather than expected actual activity as a denominator in computing the predetermined overhead rate? What advantages can you see to offset this disadvantage?

  Prepare income statement for comox company

Comox Company sells garden chairs for $65 each. The current production level is 25,000 chairs, Prepare income statement for Comox Company

  What is the unit product cost for the month

Prepare an income statement for the month using the contribution format and the variable costing method. What is the unit product cost for the month

  What net cash provided by operating activities for year is

Accounts payable decreased by $2,918 and depreciation expense of $38,386 was recorded. Net cash provided by operating activities for the year is

  What about net present value of that same potential project

If calculate the internal rate of return of a potential project and the result is 14%, what about the net present value of that same potential project?

  What is the predetermined overhead rate for the denominator

Kingdon Corporation manufacturing overhead includes $7.10, What is the predetermined overhead rate for the denominator level of activity of 4,600 machine-hours?

  What is the overhead rate per product under traditional cost

Fast and Furious bike manufactures two different levels of bicycles, What is the overhead rate per product under Traditional costing?

  What is the amount of the total relevant cost of operating

The Enhanced Products Division of Forrest Industries,What is the amount of the total relevant cost of operating the existing equipment?

  Make income statement for last year using variable costing

Prepare an income statement for last year using variable costing. What is the amount of the difference in net operating income between the two costing methods?

  What could do to accomplish shifting the reporting period

If the performance in Yr. 2 is expected to be much higher (say) 120% of budget. What could he do to accomplish shifting the reporting period?

  How many units did asif produce during the year

How many units did Asif produce during the year? Asif Co produces a product requiring a standard of 20 pounds of direct material at $3.00 per pound.

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