Part of the analysis-intial investment-after-tax cash flow

Assignment Help Financial Accounting
Reference no: EM131292671

Rossco is considering the purchase of a new computer with the following estimated costs: initial systems design, $54,000; hardware, $74,000; software, $35,000; one time initial training, $11,000; system installation, $20,000; and file conversion, $12,000. A net reduction of three employees is expected, with average yearly salaries of $40,000. The system will decrease average yearly inventory by $150,000. Annual operating costs will be $30,000 per year.

The expected life of the machine is four years, with an estimated salvage value of zero. The effective tax rate is 40%. All computer purchase costs will be depreciated using the straight line method over its four year life. Rossco can invest money made available from the reduction in inventory at its cost of capital of 11%. All cash flows, except for the initial investment and start-up costs, are at the end of the year. Assume 365 days in a year.

REQUIRED

Use a spreadsheet to perform a feasibility analysis to determine whether Rossco should purchase the computer. Compute the following as part of the analysis: intial investment, after-tax cash flows for years 1 through 4, payback period, net present value, and internal rate of return.

Reference no: EM131292671

Questions Cloud

Components of deming profound knowledge : Failure to understand the components of Deming's profound knowledge can create some severe problems. Answer the following three questions to relating Peter Scholtes's observations about the failure to understand Deming's profound knowledge.
Estimate the equilibrium partial pressure of naphthalene : estimate the equilibrium partial pressure of naphthalene over an aqueous solution containing 1 × 10-4 mol/L of naphthalene.
What are your interests and talents : Where did you grow up?- What work and extracurricular activities have you engaged in?- What are your interests and talents? What are you good at doing?
What factors account for contrast : Pipelines account for more than 20 percent of the intercity ton-miles but less than 5 percent of the revenue paid by shippers to transportation companies. What factors account for this contrast? Is this situation likely to change? Why or why not?
Part of the analysis-intial investment-after-tax cash flow : Rossco is considering the purchase of a new computer with the following estimated costs: initial systems design, $54,000; hardware, $74,000; software, $35,000; one time initial training, $11,000; Use a spreadsheet to perform a feasibility analysis to..
Description comparing the certifications : Write a 500 word WordDoc description comparing the following certifications:
Analyze the operating efficiency of the firm : Provide a background of the firm, industry, economy, and outlook for the future. Analyze the short term liquidity of the firm. Analyze the operating efficiency of the firm. Analyze the capital structure of the firm.
What is the order of the reaction in b : For the reaction A + 2B → 3C, assume that it follows the stoichiometric relation given. What is the order of the reaction in B? Write down the expression for the rate of disappearance of B and the rate of appearance of A
Prepare a statement of financial position for simpsons : Corporate Accounting (BBAC401) Prepare a statement of profit or loss and other comprehensive income for Simpsons Ltd for the year ended 30 June 2018, according to the requirements of AASB 101 (classify expenses by function) - Prepare a statement of..

Reviews

Write a Review

 

Financial Accounting Questions & Answers

  What are the actual and applied overhead amounts

Prepare a variance analysis for direct materials and direct labor and complete the standard cost sheet and all production overhead is fixed and that the $9,000 underapplied is the only overhead variance that can be computed. What are the actual and ..

  Costs incurred to advertise goods held for resale

Presented below is a list of items that may or may not be reported as inventory in a company’s December 31 balance sheet. Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be rep..

  Question mcminn retail inc is a retailer that has engaged

question mcminn retail inc. is a retailer that has engaged you to help in the preparation of its financial statements

  Prepare the journal entry to record the retirement of bonds

On that date, $240,000 of the bonds were called and retired. Prepare the journal entry to record the retirement of the bonds on December 1.

  Development of the operating budget

The Development of the operating budget is complete when

  How much money would be accumulated in years for a deposit

how much money would be accumulated in 10 years for a deposit of 10000 made at the end of year 0 if the account earned interest at %8 per year for the first 3 years, 10 % per year for the next 4 years , and 11% per year for the last 3 years ?

  How many burgers and how many packs of cigarettes

How many burgers and how many packs of cigarettes does Steve consumer to maximize his utility? 1.3. When a new tax raises the price of a burger to $3, what is his new optimal bundle? Illustrate your answer in a graph.

  Determine the new overhead allocation rate

Determine the new overhead allocation rate (i.e., per MH) assuming that the estimated overhead is $400,000; the estimated MH = 10,000.

  What value should the insurance amount cover

Under CIF/CIP contracts: What do CIF, CIP stand for? Who is legally obligated to take out the insurance cover? What value should the insurance amount cover?

  Illustrate what amount of cash did lab commercial products

During the year, Accounts Receivable decreased from $88,000 to 78,000, a decrease of $10,000. Illustrate what amount of cash did Lab Commercial Products receive from customers during 2010?

  What amount of the contribution is deductible

Phil, age 30, is married and files a joint return with his spouse. On February 15, 2014, Phil establishes an IRA for himself and a spousal IRA for his spouse with a $10,000 contribution, $5,000 for himself and $5,000 for his wife. Phil’s spouse earne..

  Investigate and identify the administrative expense

With regards to possible new loan capital, the company is currently low geared and could certainly support new debt finance. It is, however, important to keep a watch on interest cover.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd