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Home work Acct 434

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I need full explaination to each answer for this home work.;NPV and AARR, goal-congruence issues. Jack Garrett, a manager of the plate division for the Marble Top Manufacturing company, has the opportunity to expand the division by investing in additional machinery costing $420,000. He would depreciate the equipment using the straight-line method, and expects it to have no residual value. It has a useful life of seven years. The firm mandates a required after-tax rate of return of 14% on investments. Jack estimates annual net cash inflows for this investment of $125,000 before taxes, and an investment in working capital of $2,500. Tax rate is 35%.;Required;1.Calculate the net present value of this investment.;2.Calculate the accrual accounting rate of return on initial investment for this project.;3.Should Jack accept the project? Will Jack accept the project if his bonus depends on achieving an accrual accounting rate of return of 14%? How can this conflict be resolved?

 

Paper#74811 | Written in 18-Jul-2015

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