User Account

All Pages

What is the payback period of the proposed investment

Assignment Help Financial Accounting
Reference no: EM13878133

Capital Budgeting with Tax (non-MACRS Depreciation) and Sensitivity Analysis Gravina Com- pany is planning to spend $6,000 for a machine that it will depreciate on a straight-line basis over 10 years with no salvage value. The machine will generate additional cash revenues of $1,200 a year. Gravina will incur no additional costs except for depreciation. Its income tax rate is 35 percent.

Required

1. What is the payback period of the proposed investment under the assumption that the cash inflows occur evenly throughout the year?

2. What is the book rate of return (ARR) based on the initial investment outlay?

3. What is the maximum amount that Gravina Company should invest if it desires to earn an internal rate of return (IRR) of 15 percent?

4. What is the minimum annual (pretax) cash revenue required for the project to earn a 15 percent internal rate of return?

5. Prepare a single schedule to show the NPVs associated with a 10-year life under annual after-tax cash flows of $500, $1,000, and $2,000 and discount rates of 10 percent, 15 percent, and 20 percent.

Reference no: EM13878133

Questions Cloud

Identify the primary benchmarks to assess success or failure : Identify the primary benchmarks to assess success or failure
Determine present value of tax shield effect of depreciation : Determine the present value of the tax shield effect of depreciation for year 1 and the present value of the after-tax cash flows for the next four years attributable to the cash operating savings.
Write the household budget constraint : A household splits its $4,000 monthly income between necessity and luxury goods. The average price of necessities is $30 per unit and that of luxuries is $100 per unit. Write the household budget constraint.
Describe what happens to recycled cans and bottles : Describe what happens to recycled cans, bottles, and newspapers after they go to the recycling bin
What is the payback period of the proposed investment : What is the book rate of return (ARR) based on the initial investment outlay? What is the payback period of the proposed investment under the assumption that the cash inflows occur evenly throughout the year?
Compare the force exerted on the toe and heel : Compare the force exerted on the toe and heel of a 120-lb woman when she is wearing regular shoes and stiletto heels. Assume all her weight is placed on one foot and the reactions occur at points A and B asshown.
Write the household''s budget equation : Assume a household with a monthly income of $5,000. This household allocates its income to the purchasing of food and nonfood products. If the average price of food products is $20 per unit and nonfood items cost $150 per unit- Write the hous..
What effect will this have on the firms sales : During the next decade, per capita disposable income is expected to increase by $5,000. What effect will this have on the firm's sales?
Evaluate the role of international and domestic governmental : Evaluate the role of international and domestic governmental and nongovernmental organizations in the social responsibility of global corporations

Reviews

Write a Review

Financial Accounting Questions & Answers

  Calculation of requirement of cash to be maintainedthe

calculation of requirement of cash to be maintained.the wallace company must maintain a minimum cash balance of 30000.

  Journalize the transactions and the adjusting entries

Journalize the transactions and the adjusting entries and the double-declining-balance method of depreciation is used.

  Differences between pretax financial income-taxable income

Goody Inc. has no deferred tax asset or liability prior to 2010. Its pretax financial income for 2010 and 2011 is: 2010 $750,000 2011 920,000 the following items caused the only differences between pretax financial income and taxable income.

  An annual generic annual budget

Develop a 2-page spreadsheet that you will deliver to the director and staff containing an annual generic annual budget for the RTWMTC.

  Prepare a common size comparative balance sheet

Calculate the profitability ratios that can be computed from the above information and prepare a common size comparative balance sheet.

  Evaluate the companys predetermined overhead rate

Evaluate the company's predetermined overhead application rate. Determine the additions to the work-in-process inventory account for the direct material used, manufacturing overhead and direct labor.

  Determine the amount of equipment accumulated depreciation

Determine the amount of the equipment’s accumulated depreciation reported in the balance sheet dated December 31, 2011.

  How much should the owner of machine charge per hour

A track dozer cost $165,000 to purchase. Fuel, oil, grease, and minor maintenance are estimated to cost $35.00 per operating hour. A major engine repair costing more than $26,000 will probably be required after 7,200 hrs of use. How much should the o..

  Question the lbj company has budgeted sales revenues as

question the lbj company has budgeted sales revenues as given.aprilnbspnbspnbspnbspnbspnbsp maynbspnbspnbspnbspnbsp

  1 which answer is falsea the concept of working capital is

1 which answer is false?a. the concept of working capital is a basis for determining liquidityb. the working capital is

  World of business interacts with the legal realm

Consider how the world of business interacts with the legal realm. What skills does a non-legal person need as an employee? What legal training do you feel a businessperson needs in order to make good decisions? Please refer to U.S. Bureau of Labor S..

  After her employer transferred her to another town

After her employer transferred her to another town, Rosemary put her house up for sale. After two years of Internet listings, open houses, repairs, and price cuts, a buyer finally came along. By this time, the house had sat empty for 25 months before..

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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