What is the payback period of the project

Assignment Help Accounting Basics
Reference no: EM133115251

Question - Dell is considering purchasing a new computer. The machine, which costs $450,000, is projected to last five years. Dells employs straight-line depreciation and anticipates that this computer will have zero terminal disposal value after five years. At the time of purchase, the company had $50,000 in working capital. At the conclusion of the useful life, this working capital is projected to be entirely recovered. During the equipment's useful life, the new machine will save $110,000 a year in operating costs. At the end of its useful life, the machine is projected to have a salvage value of $30,000. Dells is taxed at a rate of 20% and needs an investment return of 8%.

Required -

a. Calculate the net present value (NPV) of the project (round your solution to dollars).

b. What is the payback period of the project (round your solution to two decimal places)?

c. Should the project be accepted or rejected? Why?

Reference no: EM133115251

Questions Cloud

Discuss ethical social responsibility of corporations : Discuss ethical social responsibility of corporations in such situations, including to whom duties are owed and measures such firms may use to limit liability
Allocating economic outcomes in global economies : QUESTION 1: Which of the following is NOT a means of allocating economic outcomes in global economies?
Environmental law designed to protect state fish : This is environmental law designed to protect state's fish from nonnative predators and parasites. Environmental protection is area where states can regulate
Calculate the net book value at the end of year : At the beginning of the third year, it was determined that the asset would be sold. Calculate the net book value at the end of year three
What is the payback period of the project : he machine, which costs $450,000, is projected to last five years. Dells employs straight-line depreciation. What is the payback period of the project
Framework of moral hazard : Company managers who work for the best interests of shareholders may have incentives to take risky projects at the expense of the company's creditors. Explain w
Which security has greater total risk : Which security has greater total risk? Which has greater systematic risk? Which has greater unsystematic risk? Which security will have a higher risk premium?
Speeches of executive in major corporation : Public statements or speeches of executive in a major corporation about significant initiative such as entering into joint venture or launching new product line
Evaluate the benefits of AI for marketing domain : What are the ways the banking can be modernized to meet the interests of the customers and for improving the quality for the life of the people in general

Reviews

Write a Review

Accounting Basics Questions & Answers

  What was the original cost of the asset

An asset being depreciated with the straight-line method has a residual value of $10,000 and accumulated depreciation of $30,000 in its second year.

  The following reports would be categorized as trading

Identify whether the following reports would be categorized as trading partner documents, internal documents, internal reports, or external reports:

  How much will the insurer pay Mandy to settle this claim

Mandy's home was valued at $300,000 at the time the roof was damaged. A $500 deductible applies to this loss. How much will insurer pay Mandy to settle claim

  What amount of goodwill is reported on yahoo balance sheet

Locate Note 5 to its financial statements. Identify the change in goodwill from December 31, 2008, to December 31, 2009. Comment on the change in goodwill.

  The table below shows the cost in dollars for portable

the table below shows the cost in dollars for portable electric generators rated in watts. assume the cost of these

  What is the annual value of the project

What is the overall value of the project in the present? What is the annual value of the project?

  What the remaining amount of principal still to be paid

Just prior to the payment of the 5th instalment, Ms Lake is considering repaying the loan. What the remaining amount of principal still to be paid

  What are samuel itemized deductions

Samuel, a single individual, has adjusted gross income of $150,000 - What are Samuel's itemized deductions for alternative minimum tax purposes

  Determine the present value of bonds payable

Determine the present value of 10-year bonds payable with face value of $83,000 and stated interest rate of 12%, paid semiannually

  What can Kelly do to avoid the expected higher tax rate

On June 30, 2019, Kelly sold property for $240,000 cash and a $960,000 note due on September 30, 2020. What can Kelly do to avoid the expected higher tax rate

  Exercise personal judgment

The accountant is bound to inform officials only if she stands to personally gain (make money) from knowledge of the illegal act. The accountant must exercise personal judgment; a clear-cut answer does not exist given the limited information provi..

  Compute the net income

Discontinued operations (loss before income taxes) - 49,200 and Cost of goods sold - 260,600. Compute the net income for 2017

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