Waterway Corporation is considering purchasing a new delivery truck. The truck has many advantages over the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Waterway Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $57,024. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,800. At the end of eight years, the company will sell the truck for an estimated $28,300. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Paul Harris, a new manager, has suggested that the company should not rely only on the payback approach but should also use the net present value method when evaluating new projects. The company's cost of capital is 8%. (a) Calculate the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round cash payback period to 2 decimal place, e.g. 12.51. For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and net present value to O decimal places, e.g. 5,275.) Click here to view the factor table. Cash payback period years Net present value $ Waterway Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $57,024. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,800. At the end of eight years, the company will sell the truck for an estimated $28,300. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Paul Harris, a new manager, has suggested that the company should not rely only on the payback approach but should also use the net present value method when evaluating new projects. The company's cost of capital is 8%. (a) Calculate the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round cash payback period to 2 decimal place, e.g. 12.51. For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and net present value to O decimal places, e.g. 5,275.) Click here to view the factor table. Cash payback period years Net present value $
Expert Answer:
Answer rating: 100% (QA)
Answer To calculate the cash payback period and net present value of the proposed investment we need ... View the full answer
Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1119036432
7th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
Students also viewed these accounting questions
-
ABC Insurance Company has liabilities of $5 million that it must pay in 5 years. It invests the money in a bond that has a maturity of 5 years and a coupon rate of 4% paid annually. The bond has a...
-
Problem 25. A symmetrical-network has a series impedance of 10/60 2 and shunt admittances of 0.01275 S. Determine (a) the transmission matrix and (b) the input voltage and current when there is a...
-
Suppose a CAP policy was adopted that set allowances for a fixed number of miles driven by each car owner per year. Describe a plan for implementation and trading options.
-
A rigid container, 10 m3 in volume, contains moist air at 45C, 100 kPa, = 40%. The container is now cooled to 5C. Neglect the volume of any liquid that might be present and find the final mass of...
-
When a raindrop falls, it increases in size and so its mass at time t is a function of t, namely m(t). The rate of growth of the mass is km(t) for some positive constant k. When we apply New ton's...
-
Fill in the Blank. If \(S(\overline{\omega) \text { has }}\) significant values only over a small range of frequencies, the process is called \(\mathrm{a}(\mathrm{n})\) _____________ process.
-
The Svenson Corporation manufactures cellular modems. It manufactures its own cellular modem circuit boards (CMCB), an important part of the cellular modem. It reports the following cost information...
-
A particle undergoes damped harmonic motion. The spring constant is 100 N/m; the damping constant is 8.0 x 10-3 kg?m/s, and the mass is 0.050 kg. If the particle starts at its maximum displacement, x...
-
United Green Co. is considering investing $2,500,000 in one of these two separated opportunities: Asset (B) which expected to generate the following net cash inflows during its 3 years useful life:...
-
Apple's balance sheet. Go to Apple's website to review the company's most recent annual report. Find the balance sheet and the corresponding discussion. Using concepts from the chapter, review and...
-
The Internet of Things (IoT), as discussed in Chapter 14, has blurred the line between products and services - and, as a result, taxes. The issue is how companies are taxed, because products are...
-
Look at the following research article to see how the statistical techniques you have already learned are used in practice: Watson, J., Kinstler, A., Vidonish III, W. P., Wagner, M., Li, L., Davis,...
-
Explain how Adelphia misreported non-GAAP information.
-
Letter to Shareholders. Berkshire Hathaway's annual letter to shareholders, written by CEO Warren Buffett, happens to be one of the most interesting, down-toearth, folksy, and unique communications...
-
Salli Corporation regularly purchases merchandise from their 90% owner, Playtime Corporation. Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets. At...
-
During 2012, Cheng Book Store paid $483,000 for land and built a store in Georgetown. Prior to construction, the city of Georgetown charged Cheng $1,300 for a building permit, which Cheng paid. Cheng...
-
For a non-ideal gas, fugacity (a) Is equal to pressure (c) Is not concerned with pressure at all (b) Is not equal to pressure (d) None of these.
-
The effect of temperature on fugacity can be represented by (a) \(\left(\frac{\partial \ln f}{\partial P} ight)_{T}=\frac{V T}{R}\) (b) \(\left(\frac{\partial \ln f}{\partial P} ight)_{T}=\frac{V...
-
A process is said to be uniform if there is (a) No change with time (b) No change with location over a particular region (c) Both(a) and (b) (d) Neither (a) nor (b).
Study smarter with the SolutionInn App