Compute payback period, return on average investment and npv

Reference no: EM1344935

Micro Tech is considering 2 alternative proposals for modernizing its production facilities. To provide a basis for selection the cost accounting dept has developed the following data regarding the expected annual operating results for the 2 proposals:

Proposal 1 Proposal 2
Required investment in equipment $360,000 $350,000
Est service life of equipment 8 years 7 years
Est salvage value $0 $14,000
Est annual cost savings (net cash flow) 75,000 76,000
Depreciation on equip (straight line basis) 45,000 48,000
Est increase in annual net income 30,000 28,000

A-For each proposal, compute the (1) payback period (2) return on average investment and (3) net present value, discounted at an annual rate of 12%. (round the payback period to the nearest tenth of a year and the return on investment to the nearest tenth of a percent)

B-On the basis of your analysis in part A, state which proposal you would recommend and explain the reason for your choice...

Reference no: EM1344935

Questions Cloud

What is the light intensity on a wall : A mass of 1.61kg stretches a vertical spring 0.31m. If the spring is stretched an additional 0.132m and released, how long does it take to reach (new) equilibrium position again.

Find the coefficient of kinetic friction between the ramp : Julie drives 100 mi to her Grandmother's house. On the way to Grandmother's, Julie drives half the distance at 25mph and the other half at 80. On her return trip, she drives half time at 25mph and half the time at 80 mph.

Each of the five nations that have been asked to bid : Each of the five nations that have been asked to bid for the broadcast rights for the London 2016 Games. Prepare to negotiate prices and other organizational details.

What was the resulting sound intensity level : Assume a neuron in the brain carries a current of. Treating the neuron as a straight wire, what is the magnetic field it produces at a distance of 7.50.

Compute payback period, return on average investment and npv : Micro Tech is considering 2 option proposals for modernizing its production facilities. To provide a basis for selection cost accounting dept has developed the following information;

Designing flowchart for individual invoices from credit sale : Design document flowchart to depict this situation. Individual invoices from credit sales must be temporarily stored.

Use approximately five words per bulleted item : Make a 10 to12 slide powerpoint presentation on behaviourism and social-learning theory. Include speaker notes and graphics, limit text to fie lines, and use approximately five words per bulleted item.

Explain how does imposing rent controls affect the number : Explain how does imposing rent controls affect the number of housing units available to low-income families

Designing flowchart for wholesale company : Design a flowchart to depict each situation. An individual from a wholesale company needs to prepare five copies of sales.

User Account

All Pages