MC Inc. is considering a proposal to invest $210,000 in new production equipment which will be...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
MC Inc. is considering a proposal to invest $210,000 in new production equipment which will be depreciated on a straight-line bases (7-year life, no salvage value). Depreciation expense in included in Manufacturing costs. The projected annual revenues and costs of the new product that will be produced from the equipment are: Sales $236,000 Less costs and expenses: Manufacturing costs $145,000 Selling and administrative 55,000 200,000 Income before income taxes 36,000 Income tax expense 18,000 Net income $18,000 Present Value of an Annuity of $1.00 Table Periods (n) 8% 9% 10% 11% 12% 15% 18% 20% 24% 3 2.5771 2.5313 2.4869 2.4437 2.4018 2.2832 2.1743 2.1065 1.9813 4 3.3121 3.2397 3.1699 3.1025 3.0374 2.8550 2.6901 2.5887 2.4043 3.9927 3.8897 3.7908 3.6959 3.6048 3.3522 3.1272 2.9906 2.7454 4.6229 4.4859 4.3553 4.2305 4.1114 3.7845 3.4976 3.3255 3.0205 7 5.2064 5.0330 4.8684 4.7122 4.5638 4.1604 3.8115 3.6046 3.2423 8 5.7466 5.5348 5.3349 5.1461 4.9676 4.4873 4.0776 3.8372 3.4212 6.2469 5.9953 5.7590 5.5371 5.3283 4.7716 4.3030 4.0310 3.5655 Instructions: a. Compute the cash payback period. b. Compute the net present value assuming a 10% required rate of return. c. Determine the estimated internal rate of return. d. Should MC Inc. invest in the new production equipment? Why or why not? MC Inc. is considering a proposal to invest $210,000 in new production equipment which will be depreciated on a straight-line bases (7-year life, no salvage value). Depreciation expense in included in Manufacturing costs. The projected annual revenues and costs of the new product that will be produced from the equipment are: Sales $236,000 Less costs and expenses: Manufacturing costs $145,000 Selling and administrative 55,000 200,000 Income before income taxes 36,000 Income tax expense 18,000 Net income $18,000 Present Value of an Annuity of $1.00 Table Periods (n) 8% 9% 10% 11% 12% 15% 18% 20% 24% 3 2.5771 2.5313 2.4869 2.4437 2.4018 2.2832 2.1743 2.1065 1.9813 4 3.3121 3.2397 3.1699 3.1025 3.0374 2.8550 2.6901 2.5887 2.4043 3.9927 3.8897 3.7908 3.6959 3.6048 3.3522 3.1272 2.9906 2.7454 4.6229 4.4859 4.3553 4.2305 4.1114 3.7845 3.4976 3.3255 3.0205 7 5.2064 5.0330 4.8684 4.7122 4.5638 4.1604 3.8115 3.6046 3.2423 8 5.7466 5.5348 5.3349 5.1461 4.9676 4.4873 4.0776 3.8372 3.4212 6.2469 5.9953 5.7590 5.5371 5.3283 4.7716 4.3030 4.0310 3.5655 Instructions: a. Compute the cash payback period. b. Compute the net present value assuming a 10% required rate of return. c. Determine the estimated internal rate of return. d. Should MC Inc. invest in the new production equipment? Why or why not?
Expert Answer:
Answer rating: 100% (QA)
Depreciation 210000 7 30000 Net income 18000 Net Cash Inflow ... View the full answer
Related Book For
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
Posted Date:
Students also viewed these accounting questions
-
The government is considering a proposal to allow even greater accelerated depreciation deductions than those specified by MACRS. a. For which type of company would this change be more valuable, a...
-
The management of Metro Printers is considering a proposal to replace some existing equipment with a new highly efficient laser printer. The existing equipment has a current book value of $2,200,000...
-
A firm is considering a proposal to replace one of its older machines by a new one. The feasibility study on the project has cost the company $6,000. The new equipment will cost $600,000 and require...
-
Suggest two strategies for the company to minimise the impact of the strike on business operation?
-
A recent Associated Press report stated that 30% of dentists nationwide have experienced declining revenues during the past 5 years. You survey a random sample of 100 Indiana dentists and find that...
-
What difficulties would an HR executive face in assessing and then communicating the contribution of his or her area to the company profit margin?
-
The following data were collected on specific gravity and spectrophotometer analysis for 26 mixtures of NG (nitroglycerine), TA (triacetin and 2 NDPA (2-nitrodiphenylamine). There is a need to...
-
As part of the audit of different audit areas, auditors should be alert for the possibility of unrecorded liabilities. For each of the following audit areas or accounts, describe a liability that can...
-
Robert is planning to open his own residential building design business. What nontax factors should Robert consider as he chooses his business entity? Discuss and explain whether the nontax factors...
-
Thompson Distributors packages and distributes industrial supplies. A standard shipment can be packaged in a class A container, a class K container, or a class T container. A single class A container...
-
a) With a schematic (drawing), explain the shearing mechanism in sheet metal forming (10 points) minimum 5 bullet points b) Why does burr form when shearing a sheet metal? Explain in a sentence (5...
-
Evolutionary change caused by natural selection results in species with a. greater complexity. b. less complexity. c. greater reproductive success in their environment. d. the ability to survive...
-
Variation in the traits of organisms may be attributable to a. gene mutations. b. alterations in chromosome structure. c. variation in chromosome number. d. all of the above.
-
What is the difference between a business and a pure charity? Between a business and a governmental agency?
-
Morgan observed a higher number of recombinant offspring involving eye color and wing length (401 + 318) than those involving body color and eye color (17 + 12). These results occurred because a. the...
-
What is an integrated delivery system?
-
Use the database given below to answer this question. Instructions for attempting the answer: Create a Dashboard to represent the following: 1. Pivot chart 1 to represent the region-wise Sales...
-
Suppose that A is an m n matrix with linearly independent columns and the linear system LS(A, b) is consistent. Show that this system has a unique solution.
-
What is the distinction between a capital expenditure and a revenue expenditure?
-
What relationship exists between the position of an account in the balance sheet equation and the rules for recording increases in that account?
-
William Nelson, the chief accountant of West Texas Guitar Company, was injured in an automobile accident shortly before the end of the companys first year of operations. At year-end, a clerk with a...
-
W hat is diauxic growth? Explain the roles of cAMP and CAP in this process.
-
What is antisense RNA? How does it affect the translation of a complementary mRNA?
-
What are the functions of activator proteins and repressor proteins in transcription? Explain how these proteins work at the molecular level.
Study smarter with the SolutionInn App