A. Calculate the NVP of this investment. Is the IRR higher than 6%? B. Calculate the IRR
Fantastic news! We've Found the answer you've been seeking!
Question:
A. Calculate the NVP of this investment. Is the IRR higher than 6%?
B. Calculate the IRR for the investment.
C. Determine the simple payback period using (1) before-tax cash flows and (2) after-tax cash flows
D. Determine the discounted payback period using after-tax cash flows.
E. Find the APR
F. Calculate the profitability index for the investment.
Transcribed Image Text:
The consulting company Clark Robinson & Martin (CRM) is in that never-ending budgeting phase of the year. Realizing that they couldn't defer a technology update any longer, the managers plan to replace all of the computers in the office. The old computers will be sold for market value. When the new computers reach the end of their useful lives, they will be sold as well. The cost of the combined new computers and annual software updates should be more than covered by efficiency gains and increased volume of sales - at least that's what the managers are expecting. Information related to this investment is as follows. Cost of new computers Salvage value of new computers at end of useful life Life of new computers (years) Market value of old computers today (equal to book value) Annual software update cost (necessary for all computers, old or new) Annual operating cash inflows from efficiency gains and increased sales due to new computers Minimum required rate of return Applicable tax rate $25,400 $2,400 Click here to view the factor table Determine if this investment makes sound financial sense for this company by completing the following. 5 $1,900 $3,200 $9,600 6% 24% The consulting company Clark Robinson & Martin (CRM) is in that never-ending budgeting phase of the year. Realizing that they couldn't defer a technology update any longer, the managers plan to replace all of the computers in the office. The old computers will be sold for market value. When the new computers reach the end of their useful lives, they will be sold as well. The cost of the combined new computers and annual software updates should be more than covered by efficiency gains and increased volume of sales - at least that's what the managers are expecting. Information related to this investment is as follows. Cost of new computers Salvage value of new computers at end of useful life Life of new computers (years) Market value of old computers today (equal to book value) Annual software update cost (necessary for all computers, old or new) Annual operating cash inflows from efficiency gains and increased sales due to new computers Minimum required rate of return Applicable tax rate $25,400 $2,400 Click here to view the factor table Determine if this investment makes sound financial sense for this company by completing the following. 5 $1,900 $3,200 $9,600 6% 24%
Expert Answer:
Answer rating: 100% (QA)
A Calculate the NVP of this investment Is the IRR higher than 6 NVP 25400 24001006 190010062 3200100... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
Posted Date:
Students also viewed these accounting questions
-
The payback technique is criticized for not using discounted cash flows . Under what conditions will this matter most? That is, under what patterns of cash flow will payback and NPV or IRR be likely...
-
For the following projects, calculate the payback and the discounted payback. The cost of capital is 12 per cent. Point in time (yearly intervals) -3,000 500500 500500 500 500 500 10,000 2,000 5,000...
-
Find the NPV and the IRR for the cash flows by hand, using a discount rate of 10 percent. Cash Flows ($) Year -845,000 450,000 365,000 300,000 140,000 4 -25,000 2. 3.
-
Accounting for Contingencies and Provisions In accounting, contingencies and provisions play a crucial role in preparing financial statements and ensuring accurate representation of a company's...
-
Explain the five conditions necessary for an act to be considered fraudulent.
-
(a) Show that for an L-R-C series circuit the power factor is equal to R/Z. (b) An L-R-C series circuit has phase angle 31.5. The voltage amplitude of the source is 90.0 V. What is the voltage...
-
Sketch the expectation function for the logistic growth model (12.34) for \(\theta_{1}=1, \theta_{3}=1\), and values of \(\theta_{2}=1,4,8\), respectively. Overlay these plots on the same \(x-y\)...
-
Iridium Technologies manufactures a variety of flash memory chips at its main foundry in Anam, Korea. Some chips are sold by Iridium to makers of electronic equipment while others are embedded into...
-
Calculate the current in each resistor in the following Network. What is the Potential difference voltage across the 50 resistor? 50 10 10 V 40 30
-
Watershed is a media services company that provides online streaming movie and television content. As a result of the competitive market of streaming service providers, Watershed is interested in...
-
Make a FlowChart UserVBA.xlsm-Module1 (Code) (General) calcVolume Public Function calcVolume (P As Single, As Single, N As Single) As Single Ron Larsen, Summer 2016 calcVolume (P, I,N) is designed...
-
At Cremino Company, materials are entered at the beginning of each process. Workin- Process inventories, with the percentage of work done on conversion, and production data for its Painting...
-
Winer House manufactures a fine wine in two departments, Fermenting and Bottling. In the Fermenting Department, grapes are aged in casks for a period of 30 days. In the Bottling Department, the wine...
-
Work Problem P20-39B using the FIFO method. The Dyeing Department beginning work in process of 75 units is 80% complete as to conversion costs. Round equivalent unit costs to four decimal places....
-
For its top managers, Global Travel formats its income statement as follows: Globals relevant range is between sales of $250,000 and $360,000. Requirements 1. Calculate the contribution margin ratio....
-
Refer to the information for Organic, Inc. Requirements 1. Using variable costing, calculate the unit product cost. 2. Prepare an income statement using the contribution margin format. Organic, Inc....
-
Let f(x, y) = r sin r 1+ ez -3xy + 12 Iny. Find fyy. Let yz ln x +4ry - (1+x)e-4 = 6. Find the value of at x = 1, y = 2, z = 4.
-
Refer to the information from Exercise 22-19. Use the information to determine the (1) Weighted average contribution margin , (2) Break-even point in units, and (3) Number of units of each product...
-
Since 1996, Nike, Inc. has had endorsement contracts with Tiger Woods and some of the world's best known athletes. For example, Nike has been able to gain the rights to use Tiger Woods's name in...
-
Sunman Inc. is a discount retailer with 1,000 stores located across North America. Sunman purchases bulk quantities of groceries and household goods, and then sells the goods directly to retail...
-
In 2013, Aquaculture Incorporated applied for several commercial fishing licences for its commercial fishing vessels. The application was successful and on January 2, 2014, Aquaculture was granted 22...
-
To test \(H_{0}: \sigma=50\) versus \(H_{1}: \sigma <50\), a random sample of size \(n=24\) is obtained from a population that is known to be normally distributed. (a) If the sample standard...
-
(a) Determine the critical values for a right-tailed test of a standard population deviation with 18 degrees of freedom at \(\alpha=0.1\) level of significance. (b) Determine the critical values for...
-
In Example 2 from Section 10.3, the quality-control engineer for M\&MMars tested whether the mean weight of fun-size Snickers was 20.1 grams. Suppose that the standard deviation of the weight of the...
Study smarter with the SolutionInn App