Compute the cash payback period and net present value

Assignment Help Accounting Basics
Reference no: EM133152850

Question - Ivanhoe Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $57,720. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $7,800. At the end of 8 years, the company will sell the truck for an estimated $28,100. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset's estimated useful life. Larry Newton, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company's cost of capital is 8%.

Required - Compute the cash payback period and net present value of the proposed investment.

Reference no: EM133152850

Questions Cloud

Explain the safety cut-off switch : At the start of your shift the food processor was not operating correctly. Another worker tells you "to make it work, simply jam a bamboo skewer into the safety
Discuss briefly the possible credit risk : 1) Sure Win Sdn. Bhd. has applied for a loan from your bank. Discuss briefly the possible credit risk, if any, your bank may face if this application is approve
What you can do to prevent alzheimers : What you can do to prevent Alzheimers - how personality, behavior, and medical interventions relate to the topic in the elderly
Describe the types of covenants : Identify and describe the FIVE (5) types of covenants, providing one specific example for each covenant (examples from the lecture notes will not be given full
Compute the cash payback period and net present value : Ivanhoe Corporation is considering purchasing a new delivery truck. Compute the cash payback period and net present value of the proposed investment
Compute the average product cost of one patio set : The Dorilane Company produces a set of wood patio furniture consisting of a table and four chairs. Compute the average product cost of one patio set
What is the background of the history of the expo : What is the background of the history of the Expo (aims, objectives, important innovations that were introduced at past Expos)? Explain the importance
Evaluate the implementation of knowledge management : Evaluate the implementation of knowledge management at the CSO. Why did it work? Or why didn't it work?
What is the motivation for international expansion of firms : Q1: How does foreign competition limit the prices that domestic companies can charge and the wages and benefits those workers can demand?

Reviews

Write a Review

Accounting Basics Questions & Answers

  Find the overhead applied to audit services

Gant's overhead costs consist of computer support, $327000; Find the Overhead applied to audit services using traditional costing

  List is the net pension asset or net pension liability

List is the net pension asset or net pension liability at the end of 2021? List is the projected benefit obligation at the end of 2021?

  Calculate the company break-even point in unit sales

Mauro Products distributes a single product, a woven basket whose selling price is $10 per unit and whose variable expense is $7 per unit.

  What are the faults in the director statement

How can separation of duties be applied in the information systems area? Can the organisation rely on biometric controls alone?

  Prepare the journal entry to record income tax expense

Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2008

  Discuss a vertical and horizontal analysis

the public company you have selected, please conduct a ratio analysis using both a vertical and horizontal analysis

  Determine the product cost concept for cost amount

Display Labs Inc recently began production of a new product, flat panel displays, which required the investment of $1,800,000 in assets.

  Prepare in good form a statement of changes in equity

Presented below Is Information which relates to Crane Company, Prepare in good form a statement of changes in equity for 2017. The tax rate is 30%

  Zehms company began operations in 2010 and adopted

zehms company began operations in 2010 and adopted weighted-average pricing for inventory. in 2012 in accordance with

  Number of shares of common stock 6020 market price of

the following information pertains to auburn company. assume that all balance sheet amounts represent both average and

  Would you ask the client to reproduce the data in some way

If evidence is weak or incomplete, it is hard for auditors to gain assurance on the client's claims. Would you ask the client to reproduce the data in some way

  What is the total asset balance

Question - If the company has a return on assets ratio of 25% and net income is $750,000, what is the total asset balance

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