41 terrain vehicle has received three proposals for its new vehicle painting machine 4302652

 

41) Terrain Vehicle has received three proposals for its new vehicle painting machine. Information on each proposal is as follows:

 

Proposal XProposal YProposal Z

Initial investment in equipment$180,000$120,000$190,000

Working capital needed  0 010,000

Annual cash saved by operations:

Year 175,00050,00080,000

Year 275,00048,00080,000

Year 375,00044,00080,000

Year 475,0008,00080,000

Salvage value end of year:

Year 1100,00080,00060,000

Year 280,00060,00050,000

Year 340,00040,00030,000

Year 410,00020,00015,000

Working capital returned0010,000

 

Required: Determine each proposal's payback.

42) Fabian Company is considering the purchase of a piece of materials-handling equipment:

 

Net initial investment$125,000

Estimated Useful life8 years

Estimated terminal disposal price$10,000

Estimated annual cash operating savings$35,000

Required rate of return10%

Depreciation method: straight line

 

Required:

a. Calculate payback.

b. Calculate accrual accounting rate of return based on the initial investment.

 

43) Jensen Manufacturing is considering buying a laser machine which costs $250,000. It requires working capital of $25,000. Annual cash savings are anticipated to be $103,000 for five years. The salvage value at the end of five years is expected to be nil.

 

Required:

Compute the accrual accounting rate of return based on initial investment.

 

44) Fisher Ltd. is considering the purchase of new equipment. Details of the investment follow:

 

Net initial investment$1,025,000

Estimated Useful life8 years

Estimated terminal disposal price$120,000

Estimated annual cash sales$520,000

Estimated annual cash operating expenses$295,000

Required rate of return12%

Depreciation method: straight line

 

Required:

a.Calculate payback.

b.Calculate accrual accounting rate of return based on the initial investment.

c.Calculate the net present value.