The raab company is expanding its production facilities to

Assignment Help Accounting Basics

Reference no: EM13597120

The Raab Company, is expanding its production facilities to include a new product line, a sporty automotive tire rim. Tire rims can now be produced with little labor cost using new computerized machinery. The controller has advised management about two such machines. The details about each machine are as follows:

XJS Machine HZT Machine
Cost of machine $500,000 $550,000
Residual value 50,000 55,000
Net income 34.965 40,670
Annual net cash inflows 91,215 90,170

The company's minimum rate of return is 12 percent. The maximum payback period is six years. (Round calculations where necessary)

Requirements:

1. For each machine, compute the projected accounting rate of return.

2. Compute the payback period for each machine.

3. Based on the information from requirements 1 and 2, which machine should be purchased? Why?

Reference no: EM13597120

Questions Cloud

Rhodes induced ms davidson to enter into an employment : rhodes induced ms. davidson to enter into an employment contract by deliberately telling ms. davidson certain material

Consider the process of accelerating a car from 0 to 60 : consider the process of accelerating a car from 0 to 60 miles per hour in 10 seconds versus 30 seconds.do both use the

The credit purchase of a delivery truck for 4700 was : the credit purchase of a delivery truck for 4700 was recorded to delivery trucks as a 4700 debit and to accounts

While the majority of its revenues are recognized at point : nomar industries inc. operates in several lines of business including the construction and real estate industries.

The raab company is expanding its production facilities to : the raab company is expanding its production facilities to include a new product line a sporty automotive tire rim.

What is wren corporations basis in the property transferred : sara and jane form wren corporation. sara transfers property basis of 25000 and value of 200000 for 50 shares in wren

Suppose that all 175l of liquid nitrogen in the tank : liquid nitrogen has a density of 0.808 gml and boils at 77 k. researchers often purchase liquid nitrogen in insulated

On february 2 the corporation purchased goods from martin : described below are certain transactions of edwardson corporation. the company uses the periodic inventory system.1. on

Darwin vans limited can borrow at 1150 percent darwin : darwin vans limited can borrow at 11.50 percent. darwin currently has no debt and the cost of equity is 14.00 percent.

User Account

All Pages