Question: Liam Mitchell, a manager of the Plate Division for the Harvest Manufacturing company, has the opportunity to expand the division by investing in additional machinery

Liam Mitchell, a manager of the Plate Division for the Harvest Manufacturing company, has the opportunity to expand the division by investing in additional machinery costing $495,000. He would depreciate the equipment using the straight-line method and expects it to have no residual value. It has a useful life of 9 years. The firm mandates a required after-tax rate of return of 14% on investments. Liam estimates annual net cash inflows for this investment of $130,000 before taxes and an investment in working capital of $5,000 that will be returned at the project's end. Harvest's tax rate is 30%.
Required
1. Calculate the of this investment.
2. Calculate the accrual accounting rate of return based on net initial investment for this project.
3. Should Liam accept the project? Will Liam accept the project if his bonus depends on achieving an accrual accounting rate of return of 14%? How can this conflict be resolved?

Step by Step Solution

★★★★★

3.53 Rating (156 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

1 Annual cash flow from operations 130000 Income tax payments 30 39000 Annual aftertax cash flow fro... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1277-B-C-A-C-A(4151).docx

120 KBs Word File

Students Have Also Explored These Related Cost Accounting Questions!

In Problems 4.1 to 4.6, the input voltage V, is de and positive with the polarity shown. Specify how to implement the switches using a position minimal number of diodes and transistors, such that the...

NPV and AARR, goal-congruence issues. Nate Stately, a manager of the Plate Division for the Great Slate Manufacturing Company, has the opportunity to expand the division by investing in additional...

NPV and AARR, goal-congruence issues Jack Garrett, a manager of the plate division for the Marble Top Manufacturing Company, has the opportunity to expand the division by investing in additional...

Nate Stately, a manager of the Plate division for the Great Slate Manufacturing Company, has the opportunity to expand the division by investing in additional machinery costing $320,000. He would...

21-37 NPV and AARR, goal-congruence issues. Liam Mitchell, a manager of the Plate Division for the Harvest Manufacturing company, has the opportunity to expand the division by investing in additional...

Cash Flows Eric Scanzillo, a manager at the Plate Division for Ore City Manufacturing Company, has the opportunity to expand the division by investing in additional machinery costing $430,000. He...

Eric Sander, a manager of the Plate Division for the MarbleTop Manufacturing company, has the opportunity to expand the division by investing in additional machinery costing $490,000. He would...

Reed Huntley, a manager of the Plate Division for the Rosewood Manufacturing company, has the opportunity to expand the division by investing in additional machinery costing $425,000. He would...

Billy Garrett,a manager of the Plate Division for the Granite CityManufacturing company, has the opportunity to expand the division by investing in additional machinery costing $495,000.He would...

You have two flat metal plates, each of area 1.00 m2, with which to construct a parallel-plate capacitor. (a) If the capacitance of the device is to be 1.00 F, what must be the separation between the...

The following data (stored in Drink) represent the amount of soft drink in a sample of 50 consecutively filled 2 liter bottles. The results are listed horizontally in the order of being filled: a....

Question 2 2 ( 5 points ) Perform the following conversions. a [ x , y ] = [ 1 , 2 ] + s [ 3 , 4 ] t o scalar form A x + B y + C = 0 ( 2 marks ) b 2 x - 3 y + 4 z - 5 = 0 t o parametric form. ( 3...

A passenger car of an overhead monorail system is driven by one of its two small wheels A or B. Select the one for which the car can be given the greater acceleration without slipping the driving...

Write a Java program to imitate a file system of an operating system. In your solution, design a class called BasicFile with options to carry out the following operations: (a) Select and open an...

For the past several years, Jeff Horton has operated a part-time consulting business from his home. As of April 1, 20Y9, Jeff decided to move to rented quarters and to operate the business, which was...

The scarce and essential metal, manganese, has been found in abundance in nodules on the deep seafloor. To investigate the relationship between the magnetic age of Earths crust on the ocean floor and...

A turbine receives steam at 6 MPa, 600C with an exit pressure of 600 kPa. Assume the turbine is adiabatic and neglect kinetic energies. Find the exit temperature and the specific work.

10. President Trump sought to increase economic growth by cutting taxes and reducing regulation of production. How did these two initiatives affect the AS and AD curves? LO8-4

Distinguish between a joint product and a byproduct?

Why might the number of products in a joint-cost situation differ from the number of outputs? Give an example.

Provide three reasons for allocating joint costs to individual products or services?

Answer. P(si) for i = 1, 2, 3 as given below: X1(t) P(s1 ) = 3/10 S 0 s1 $2 X2(t) $3 P($2) = 1/5 0 2 -1 X3(t) P($3) = 1/2 2 0 Let the random variable X1 be defined by sampling the random process X(t)...

Motor Vehicles Body Shops contracts to buy from Paint Supply & Equipment Headquarters, Inc., twenty-four spray paint guns at $30 each to be delivered by October 1. Paint Supply knows that Motor...

10.3.41-BE Assigned Media Question Help The following table contains data from a random sample of 12 states and lists expenditures (in billions of dollars) by category spent by states and local...