X company is considering investing in manufacturing

Reference no: EM13584473

X company is considering investing in manufacturing equipment expected to cost $184,000. The equipment has an estimated useful life of four years and a salvage value of $24,000. It is expected to produce incremental cash revenues of $95,000 per year. Zito has an effective income tax rate of 30 percent and a desired rate of return of 12 percent

(a) Determine the net present value and the present value index of the investment, assuming that the company uses straight-line depreciation for financial and income tax reporting

Net present value
Present value index

(b) Determine the net present value and the present value index of the investment, assuming that the company uses double-declining-balance depreciation for financial and income tax reporting.

Net present value
Present value index

(c) Determine the payback period and unadjusted rate of return (use average investment), assuming that the company uses straight-line depreciation.

Payback in years
Unadjusted rate of return

(d) Determine the net present value and the present value index of the investment, assuming that the company uses double-declining-balance depreciation for financial and income tax reporting.

Net present value
Present value index

(e) Determine the payback period and unadjusted rate of return (use average investment), assuming that the company uses straight-line depreciation

Payback in years
Unadjusted rate of return

(f) Determine the payback period and unadjusted rate of return (use average investment), assuming that the company uses double-declining-balance depreciation.

Payback in years
Unadjusted rate of return

Reference no: EM13584473

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