Reference no: EM132961217
Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided.)
Project 1: Retooling Manufacturing Facility
This project would require an initial investment of $4,850,000. It would generate $865,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,000,000.
Project 2: Purchase Patent for New Product
The patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate $425,000 additional annual net income for Hearne.
Project 3: Purchase a New Fleet of Delivery Trucks
Hearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,000. Purchasing the fleet would allow Hearne to expand its customer territory resulting in $200,000 of additional net income per year.
Required:
Problem 1. Determine each project's accounting rate of return.
Problem 2. Determine each project's payback period.
Problem 3. Using a discount rate of 10 percent, calculate the net present value of each project.
Problem 4. Determine the profitability index of each project and prioritize the projects for Hearne.
|
Determine the number of str drums
: Determine the number of STR drums (if any) that should be purchased and the number of STR drums and/or park benches (if any)
|
|
Implement an effective environmental management
: Provide suggestions on how businesses should implement an effective environmental management. Need half page answer. assignment purpose
|
|
What is his standard deduction
: In 2020, Jimmy "Jerry Jones" Johnson is over 65 years of age and has no dependents. His only income was his salary of $220,500. What is his standard deduction
|
|
How to prepare an enterprise master person identification
: How to prepare an Enterprise Master Person Identification (EMPI) Policy
|
|
Determine the profitability index of each project
: Determine the profitability index of each project and prioritize the projects for Hearne. Hearne Company has a number of potential capital investments.
|
|
Compute degree of operating leverage and total leverage
: Firm R has sales of 102,000 units at units at $1.97 per unit, Compute degree of operating leverage, financial, and total leverage from firm R.
|
|
What is the share in net income of J
: Using the same data, what is the share in net income of J assuming the bonus is equivalent to 20% of net income after interest and salary
|
|
How does operating budgets for merchandising
: How does operating budgets for merchandising, service, and not-for-profit organizations work? Explain how to record standard costs and variances using journal
|
|
What is firm cost-of-equity estimate according to dcf method
: Golden State's target capital structure calls for 60 percent debt financing, What is the firm's cost-of-equity estimate according to the DCF method?
|