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.
