Sony Corporation is considering a project that requires an initial investment of $750,000 The asset will be depreciated over five years at 20 per year The cash flows are expected to be Year Inflow ($) Outflow ($) Year 1 230,000 95,000 Year 2 240,000 100,000 Year 3 250,000 105,000 Year 4 260,000 110,000 Year 5 270,000 115,000 a What is the payback period b Calculate the accounting rate of return (ARR) each year and the average c Assuming a cost of capital of 9 , what is the net present value (NPV) of the cash flows d Should Sony Corporation accept the project

The Answer is in the image, click to view ...

Question: Sony Corporation is considering a project that requires an initial investment of $750,000. The asset will be depreciated over five years at 20% per year.

Sony Corporation is considering a project that requires an initial investment of $750,000. The asset will be depreciated over five years at 20% per year. The cash flows are expected to be:

Year	Inflow ($)	Outflow ($)
Year 1	230,000	95,000
Year 2	240,000	100,000
Year 3	250,000	105,000
Year 4	260,000	110,000
Year 5	270,000	115,000

a. What is the payback period?
b. Calculate the accounting rate of return (ARR) each year and the average.
c. Assuming a cost of capital of 9%, what is the net present value (NPV) of the cash flows?
d. Should Sony Corporation accept the project?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

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

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

An electrical resistor is connected to a battery, as shown schematically. After a brief transient, the resistor assumes a nearly uniform, steady-state temperature of 95C, while the battery and lead...

1. Mille-Hiver Corp. is considering a 20-year project that requires an initial investment of $15 million. The project provides an annual cash inflow of $1.5 million for the first ten years and an...

Question 1 Mille-Hiver Corp. is considering a 20-year project that requires an initial investment of $15 million. The project provides an annual cash inflow of $1.5 million for the first ten years...

Chevron Corporation is considering a project that requires an initial investment of $500,000. The asset will be depreciated over five years at 20% per year. The cash flows are expected to be: Year...

Toyota Motor Corporation is considering a project that requires an initial investment of $550,000. The asset will be depreciated over five years at 20% per year. The cash flows are expected to be:...

Microsoft Corporation is considering a project that requires an initial investment of $250,000. The asset is depreciated over five years at 20% per year. The cash flows are expected to be: Year...

Analyze the cost of capital situations of the following company cases, and answer the specific questions that finance professionals need to address. Consider the case of Turnbull Co. Turnbull Co. has...

Hi can you solve this problem :) Thank you! Looking forward to give you a thumbsup :) Turnbull Co. is considering a project that requires an initial investment of $570, 000. The firm will raise the...

Turnbull Co. is considering a project that requires an initial investment of $570, 000. The firm will raise the $570, 000 in capital by issuing $230, 000 of debt at a before-tax cost of 11.1%, $20,...

Walton Group is considering a project to start manufacturing cars for Bangladesh market. The project requires an initial investment of 10 million and has a 5 years life. The yearly cash flows are...

Multiple Choice Questions: 1) The cost of units sold is recorded by debiting Cost of Goods Sold and crediting: A) Finished Goods Inventory. B) Sales Revenue. C) Work-in-Process Inventory. D) Wages...

If someone tells you he or she works in finance, it could mean any number of different things. Identify each area of finance being described in the following table. Financial Markets and Managerial...

A bacteria culture initially contains 2 5 0 0 bacteria and doubles every half hour. Find the size of the bacterial population after 4 0 minutes. Find the stze of the bacterial population after 5...

A child having a mass of 50 kg holds her legs up as shown as she swings downward from rest at 01 = 30o. Her center of mass is located at point G1. When she is at the bottom position θ = 0o, she...

A circular hoop is suspended in a horizontal plane by three strings, each of length l, which are attached symmetrically to the hoop and are connected to fixed points lying in a plane above the hoop....

The plane of a square loop of wire with edge length a = 0.200 m is perpendicular to the Earths magnetic field at a point where B = 15.0 /T, as shown in Figure P31.55. The total resistance of the loop...

A 2.50-kg textbook is forced against a horizontal spring of negligible mass and force constant 250 N/m, compressing the spring a distance of 0.250 m. When released, the textbook slides on a...

A metal sign for a car dealership is a thin, uniform right triangle with base length b and height h. The sign has mass M. (a) What is the moment of inertia of the sign for rotation about the side of...

Tori and some other childeen experimented with balls to see which ones rolled. First using a piece of cardboard to use as a ramp, they angled it on a block to the floor to test the balls. Then Tori...

During a preliminary survey, an auditor found that several accounts payable vouchers for major suppliers required adjustments for duplicate payment of prior invoices. This would indicate: (a) A need...

An internal auditor plans to conduct an audit of the adequacy of controls over investments in new financial instruments. Which of the following would not be required as part of such an engagement?...

During an assessment of the risk associated with sales contracts and related commissions, which of the following factors would most likely result in an expansion of the engagement scope? (a) An...