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Managerial Accounting 1B Ch24

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Question;Managerial Accounting 1B;Financial;and Managerial Accounting;Chapter 24;1.Exercise 24-1;Payback period computation, even cash flows L.O. P1;Compute the payback period for;each of these two separate investments;a.;A new operating system for an existing;machine is expected to cost $260,000 and have a useful life of five years.;The system yields an incremental after-tax income of $75,000 each year after;deducting its straight-line depreciation. The predicted salvage value of the;system is $10,000.(Round your answer to 2;decimal places.);Payback period;b.;A machine costs $190,000, has a;$10,000 salvage value, is expected to last nine years, and will generate an;after-tax income of $30,000 per year after straight-line depreciation.(Round your answer to 1 decimal place.);Payback period;2.;Exercise 24-2 Payback period computation, uneven cash flows L.O.;P1;Wenro Company is considering the;purchase of an asset for $90,000. It is expected to produce the following net;cash flows. The cash flows occur evenly throughout each year.;Year;1;Year;2;Year;3;Year;4;Year;5;Total;Net cash flows;$;30,000;$;20,000;$;30,000;$;60,000;$;19,000;$;159,000;Compute the payback period for;this investment. (Round your intermediate;calculations to 3 decimal places and final answer to 1 decimal place.);Payback period;3.;Exercise 24-3 Payback period computation, declining-balance;depreciation L.O. P1;A machine can be purchased for;$300,000 and used for 5 years, yielding the following net incomes. In;projecting net incomes, double-declining balance depreciation is applied;using a 5-year life and a $50,000 salvage value.;Year;1;Year;2;Year;3;Year;4;Year;5;Net incomes;$;20,000;$;50,000;$;100,000;$;75,000;$;200,000;Compute the machine?s payback;period (ignore taxes). (Round your;intermediate calculations to 3 decimal places and final answer to 2 decimal;places.);Payback period;4.;Exercise 24-4 Accounting rate of return L.O. P2;A machine costs $500,000 and is;expected to yield an after-tax net income of $15,000 each year. Management predicts;this machine has a 10-year service life and a $100,000 salvage value, and it;uses straight-line depreciation. Compute this machine?s accounting rate of;return. (Omit the "%" sign in your;response.);Accounting rate of;return;5.;Exercise 24-6 Computing net present value L.O. P3;K2B Co. is considering the;purchase of equipment that would allow the company to add a new product to;its line. The equipment is expected to cost $240,000 with a 12-year life and;no salvage value. It will be depreciated on a straight-line basis. K2B Co.;concludes that it must earn at least a 8% return on this investment. The;company expects to sell 96,000 units of the equipment?s product each year.;The expected annual income related to this equipment follows. (UseTable B.3);Sales;$;150,000;Costs;Materials;labor, and overhead (except depreciation);80,000;Depreciation;on new equipment;20,000;Selling;and administrative expenses;15,000;Total costs and;expenses;115,000;Pretax income;35,000;Income taxes (30%);10,500;Net income;$;24,500;Compute the net present value of;this investment. (Round "PV Factor;to 4 decimal places. Round your intermediate calculations and final answer to;the nearest dollar amount. Omit the "$" sign in your response.)

 

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