9 2The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. Themachine would add to student convenience, but the dean feels compelled to earn an 12 percent return on the investment of funds.Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machinewould probably produce incremental cash inflows of approximately $12,000 per year. The machine is expected to have a three-yearuseful life with a zero salvage value. (Use appropriate factor(s) from the tables provided.)BookHotPReferencesRequireda. Use Present Value Appendix PV of $1. to determine the maximum amount of cash the dean should be willing to pay for a copymachine. (Round your intermediate calculations and final answer to 2 decimal places.)b. Use Present Value Appendix PVA of S1, to determine the maximum amount of cash the dean should be willing to pay for a copymachine. (Round your final answer to 2 decimal places.)a Maximum amount (PV)Maximum amount (VA)

Under PV of $1 method, Each cash flow will be multiplied by each year's present value factor to…

Answered: 2 The dean of the School of Fine Arts…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels compelled to earn an 6 percent return on the investment of funds. Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine would probably produce incremental cash inflows of approximately $13,500 per year. The machine is expected to have a three-year useful life with a zero salvage value. Note: Use appropriate factor(s) from the tables provided. Required a. Use Present Value Appendix PV of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy machine. Note: Round your intermediate calculations and final answer to 2 decimal places. b. Use Present Value Appendix PVA of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy machine. Note: Round your final…
The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels compelled to earn an 10 percent return on the investment of funds. Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine would probably produce incremental cash inflows of approximately $16,500 per year. The machine is expected to have a three-year useful life with a zero salvage value. Note: Use appropriate factor(s) from the tables provided. W Required a. Use Present Value Appendix PV of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy machine. Note: Round your intermediate calculations and final answer to 2 decimal places. b. Use Present Value Appendix PVA of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy machine. Note: Round your final…
The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels compelled to earn an 10 percent return on the investment of funds. Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine would probably produce incremental cash inflows of approximately $19,000 per year. The machine is expected to have a three-year useful life with a zero salvage value. (Use appropriate factor(s) from the tables provided.) Required a. Use Present Value Appendix PV of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy machine. (Round your intermediate calculations and final answer to 2 decimal places.) b. Use Present Value Appendix PVA of $1, to determine the maximum amount of cash the dean should be willing to pay for a copy machine. (Round your final answer to 2…
For following problem, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. A new air conditioning system is to be installed in an office building. Purchasing and installing the system costs $100,000 and the company expects to save $50,000 every year on electricity bills. The company’s MARR is 10% per year, maintenance costs are worked out to be $10,000 per year and the system’s market value will be $20,000 at the end of 10 years. Use the FW method to determine whether the system should be installed.
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The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best cash payback. Machine A Machine B Machine C Annual cash flow $40,000 $50,000 $75,000 Average investment 300,000 250,000 500,000 a.Machine A b.Machine C c.Machine B d.Machines B and C have the same preferred payback period.
For each of the following problems, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. Company E is considering installing Valutemp temperature loggers in all of its refrigerated trucks for monitoring temperatures during transit. If the systems will reduce insurance claims by $500,000 in each of the next 5 years, how much should the company be willing to spend now if it uses an interest rate of 10% per year?
Ventura Driving School is considering purchasing new autos costing $220,000. The company's management has estimated that the autos will generate cash inflows as follows: Year 1 $ 85,000 Year 2 $ 100,000 Year 3 $ 70,000 Year 4 $ 55,000 Considering the residual value is zero, calculate the payback period. Round to one decimal place. The payback in years is GELD
Students at Harvard University are interested in developing a 6th generation 3D printer. The project has a two-year life with an initial investment of $160,000 to fund a year-long development phase. At the end of a year, a further $85,000 is required for production. Cash inflows from sales will occur at the end of the second year. The Project Manager of this additive manufacturing development team at the university is very aware of the uncertainty about the amount of cash inflows as it is unclear whether the market will embrace such a new innovative device. The management team believes there is a 70 percent probability that the new device will be a success. They also believe that the direction of device will become more apparent over the next year. In particular, there is an 80 percent chance that the direction over the next year will continue over the subsequent year. If the device is initially a success and this direction continues in the next year, the payoff will be $465,000. If…
Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Yearly Aftertax Hillcrest Apartments Yearly Aftertax Cash Inflow 50,000 55,000 70,000 85,000 90,000 Windy Acres Probability Cash Inflow 0.2 55,000 0.2 60,000 0.2 0.2 0.2 70,000 80,000 Probability 0.4 0.2 0.1 0.3 Mr. Backster is likely to hold the apartment complex of his choice for about 35 years and will use this period for decision-making purposes. Either apartment can be purchased for $200,000. Mr. Backster uses a risk-adjusted discount rate approach when evaluating investments. His scale is related to the coefficient of variation (for other types of investments, he also considers other measures). Coefficient of Variation 0-0.35 0.35-0.40 0.40-0.50 Over 0.50 Discount Rate 8% 12 (cost of capital) 16 not considered a. Compute the…
The staff of ProHealth Medical Services has established the following net cash flows for a food services operation that may open in its outpatient clinic. Year Expected Net Cash Flow 0 ($100,000) 1 40,000 2 40,000 3 40,000 4 40,000 5 40,000 5 (Salvage Value) 30,000 The time 0 cash flow is the net investment outlay, while the final amount is the terminal cash flow. The clinic is expected to move to a new building in five years. All other flows represent net operating cash flows ProHealth’s corporate cost capital is 10% a. What is the projects IRR? b. Assuming the project has average risk, what, is its NPV? c. Now, assume that the operating cash flows in years 1 through 5 could be as low as 30,000 or as high as $50,000. Furthermore, the salvage value cash flow at the end of year 5 could be as low as $0 or as high as $40,000. What are the worst-case and best-case IRRS? The worst-case and best-case NPVs?
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