Evaluate the net present value of the investment

Assignment Help Accounting Basics
Reference no: EM13525196

Thurman Munster, the owner of Adams Family RVs, is considering the addition of a service center his lot. The building and equipment are estimated to cost $1,100,000 and both the building and equipment will be depreciated over 10 years using the straight-line method. The building and equipment have zero estimated residual value at the end of 10 years. Munster's required rate of return for this project is 12 percent. Net income related to each year of the investment is as follows:

Revenue $450,000
Less:
Material cost $ 60,000
Labor 100,000
Depreciation 110,000
Other 10,000 280,000
Income before taxes 170,000
Taxes at 40% 68,000
Net income $102,000

(a) Determine the net present value of the investment in the service center. Should Munster invest in the service center?

(b) Calculate the internal rate of return of the investment to the nearest A??1 percent.

(c) Calculate the payback period of the investment.

(d) Calculate the accounting rate of return.

Reference no: EM13525196

Questions Cloud

How do you define explanatory cause : How do you define explanatory cause? Do you agree that every human choice or event has an explanatory cause? How do you define human choice? How do you definite human event? Are they different?
Define transmittance and the molar absorption coefficient : With the pure solvent in the light path, the meter reading is 78; with a 0.1 M solution of a solute in the same solvent, the meter reading is 55. The light path is 0.5 cm. Calculate the absorbance, the transmittance, and the molar absorption coeff..
Calculate tater and peppers 2012 ebit : Calculate Tater and Pepper's 2012 EBIT. (Enter your answer in millions of dollars rounded to 1 decimal place.)
Capable of dealing with labor-management problems : Are current labor laws capable of dealing with labor-management problems, or should they be abolished? If abolished, what should their replacements (if any) address?
Evaluate the net present value of the investment : Determine the net present value of the investment in the service center. Should Munster invest in the service center and calculate the internal rate of return of the investment to the nearest A?
Every event has an explanatory cause : Do you agree that every event has an explanatory cause? How do you define event? How do you define explanatory cause?
Compute the potential of a zinc electrode immersed : Calculate the potential of a zinc electrode immersed in 0.0100M in Zn(NH3)4 2+ and 0.25M in NH3 B4 for Zn(NH3)4 2+ is 7.76*10^8
Find at what speed would the electrons impact the phosphors : Suppose electrons in a TV tube are accelerated through a potential difference of 2.00 104 V from the heated cathode, At what speed would the electrons impact the phosphors on the screen
State ni metal on an electrode by passing through a solution : How many seconds would it take to deposit 0.500 g of Ni metal on an electrode by passing a 3.00 amp current through a solution of Ni2+

Reviews

Write a Review

Accounting Basics Questions & Answers

  Year-end balance sheet and income statement

Indicate the account names and adjusted balances that should be reported on Jaworski's year-end balance sheet and income statement.

  Pros and cons of management treating direct labor

What are the pros and cons of management treating direct labor as a variable cost? Are there ethical issues to be considered here?

  Margan corporation had the following transactions and

margan corporation had the following transactions and events. 1. declared a cash dividend. 2. issued par value common

  Identify the type of ira

Identify the type of IRA that would be best for a taxpayer in each of the circumstances Sharon believes she will be in a higher tax bracket when she withdraws the money in retirement.

  Underlying theme of the conceptual framework

Decision usefulness is an underlying theme of the conceptual framework, true or false? Users of financial statements are assumed to have substantial knowledge of business and financial accounting matters by financial statement preparers, true or fa..

  Good internal controls are essential for effective and

good internal controls are essential for effective and efficient operations of an enterprise. the downside is excessive

  Major weakness of performance report

Discuss the major weakness of performance report. Describe clearly why all the variances for variable expenses are unfavourable (U).

  Discuss your thoughts on ceo exceptionally high pay

Discuss your thoughts on whether CEOs' exceptionally high pay is economically justified. Explain your rationale.

  Briefly explain the depreciation and impairment process

Briefly explain the depreciation and impairment process in relation to approximating the fair value of fixed assets?

  Prepare the adjusting entry to record bad debts expense

Erik Co. elects to use the percentage-of-sales basis in 2012 to record bad debts expense. It estimates that 3% of net credit sales will become uncollectible. Sales are $808,455 for 2012, sales returns and allowances are $47,894, and the allowance ..

  Write down a papernbspthat states the major aspects of

writenbspa papernbspthat describes the main aspects of the regulatory environment which will protect the public from

  Brian and charlie are brothersanswer each of the following

jbc corporation is owned 20 percent by john 30 percent by bryan 30 percent by charlie and 20 percent by zcorporation. z

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