Compute the net present value of the investment

Assignment Help Managerial Accounting
Reference no: EM132955040

Question - Bigsby LLC wants to buy a CAD machine but needs your help in analyzing a proposal:

Cost $270,000

Salvage value in 8 years $10,000

Annual cash operating savings for 8 years (end of year) $50,000

Estimated useful life in years 8

Minimum desired rate of return 10%

The Bigsby uses straight-line depreciation method for financial reporting. The cash savings from operating the new CAD machine are $50,000. Depreciation expense is not included.

REQUIRED -

A) Compute the net present value of the investment.

B) Compute the payback period.

C) Compute the accounting rate of return using the initial required investment.

Reference no: EM132955040

Questions Cloud

Calculate julie child and dependent care credit prior : Please calculate Julie's child and dependent care credit prior to any tax liability limitation under these two unique scenarios
Did Luther benefit from the forward contract : Simultaneously Luther entered into a one-year forward contract to purchase £375,000. Did Luther benefit from the forward contract
What amounts should Tom Petty report on its balance sheet : What amounts should Tom Petty report on its balance sheet for current assets and current liabilities at 12/31/20
Compute the carrying value of the investment : Inventory's fair value is P2,000,000 greater than its carrying amount. Compute the carrying value of the investment
Compute the net present value of the investment : Annual cash operating savings for 8 years (end of year) $50,000. Compute the net present value of the investment
What is the division roi before the acquisition : The Green Division of Colors Company currently earns P 2,340,000 and has divisional assets of P 19,500,000. What is the division ROI before the acquisition
Would it ever be worth exercising it early : A futures price is currently 60 and its volatility is 25%. The risk-free interest rate is 10% per year. Would it ever be worth exercising it early
How long will it take to settle the loan with payments : Paul obtained a loan of $27,500 at 5.30% compounded monthly. How long will it take to settle the loan with payments of $1,600 at the end of every month
How much will she have in her account : In addition, she will receive $15,000 one year from today and $25,000 two years from today. How much will she have in her account

Reviews

Write a Review

Managerial Accounting Questions & Answers

  What is a post audit and how can provide useful input

What is a post audit and how can it provide useful input for future capital investment decision, especially those involving advanced technology?

  What parties are affected by these minor compromises

What parties are affected by these "minor compromises"? Can Anita Lilly take action to eliminate any ethical concerns? Explain

  Compute amount of service department costs assigned

Determine the amount of service department costs assigned to each of the homes using this allocation base. (Round percentages to two decimal places)

  Prepare production budget for second and third quarter

Prepare Production Budget for second quarter and third quarter. It is decided that finished kits inventories are to be 25000, at the end of the second quarter

  What was the direct materials price variance for march

What is the standard cost of a single blanket, what was the actual cost per blanket produced during March and what was the direct materials price variance for March

  Time value of money and income taxes

Ignoring the time value of money and income taxes, determine the relevant and differential (Quantity a five-year period)

  What is net cash provided or used by operating activities

Prepaid expenses increased $9,600; accounts payable increased $6,900. What is the net cash provided or used by operating activities

  How do estimate what is the contribution margin ratio

If Dunder Mifflin sells 900,000 units, what is its contribution margin ratio? Dunder Mifflin sells all its paper at the prices, with costs

  What do the managers learn from the cash budget

Half of the $424,000 in sales from last quarter will be collected during Q2. Expected disbursements are budgeted at $220,000. What do the managers learn

  What professional and personal traits are necessary

What professional and personal traits are necessary for the position?

  Identify additional variables by examining residuals

How is it possible to identify additional or lurking variables by examining residuals? Does a strong correlation of a regression analysis always mean

  How many rooms should be protected for high-fare customer

Reserved for the more profitable high-fare customers. To maximize expected profits, how many rooms should be 'protected' (or reserved) for high-fare customers?

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