Accounting 202 Homework 19 Chapter 12

You invest a lump sum of $7,250 for three years at 14​% interest. What is the​ investment's value at the end of three years?

10,745

In a different account earning 14​% interest, you invest $2,417 at the end of each year for three years. What is the​ investment's value at the end of three years?

8,314

All of the computers at the help desk are being upgraded at a cost of​ $202,000.

Capital investment

The cost to purchase a new retail commerce system for the​ company's website is​ $1,785,000.

Capital investment

The cost to retrofit one of a​ company's closed retail outlets into a customer service center is projected to be​ $250,000.

Capital investment

The upgrade of the customer service fleet to new​ fuel-efficient vehicles has a cost of​ $400,000.

Capital investment

The​ delivered, installed cost of a new production line is​ $720,000.

Capital investment

The cost of raw materials for the year is estimated at​ $570,000.

Noncapital investment

The cost of​ workers' compensation insurance for the coming year is projected to be​ $430,000.

Noncapital investment

The replacement of the engine on one of a​ company's aircraft is​ $240,000 (this will not increase the useful life of the​ plane).

Noncapital investment

The total cost of the management succession program for the coming year is projected to be​ $330,000.

Noncapital investment

To support the launch of the new product​ line, staff training costs are​ $175,000.

Noncapital investment

Determine whether Stenback should purchase this plant. The payback occurs (a) ___ when the plant must be​ replaced, so the payback method (b) ___ purchasing the plant.

a. After b. Does not support

Golf Products is considering whether to upgrade its equipment. Managers are considering two options. Equipment manufactured by Stenback Inc. costs $900,000 and will last six years and have no residual value. The Stenback equipment will generate annual operating income of $153,000. Equipment manufactured by Brookside Limited costs $1,170,000 and will remain useful for seven years. It promises annual operating income of $234,000​, and its expected residual value is $100,000. ​First, enter the​ formula, then calculate the ARR​ (Accounting Rate of​ Return) for both pieces of equipment. (a) ___ / (b) ___ = accounting rate of return Stenback: (c) ___ / (d) ___ = (e) ___% Brookside: (f) ___ / (g) ___ = (h) ___ % Which equipment offers the higher​ ARR? The (i) ___ equipment offers the higher rate of return.

a. Average annual operating income from asset b. Initial investment c. 153,000 d. 900,000 e. 17% f. 234,000 g. 1,170,000 h. 20% i. Brookside

Stenback Products is considering acquiring a manufacturing plant. The purchase price is $2,464,000. The owners believe the plant will generate net cash inflows of $308,000 annually. It will have to be replaced in five years. To be​profitable, the​investment's payback period must occur before the​investment's replacement date. Use the payback method to determine whether Stenback Products should purchase this plant. First enter the​ formula, then calculate the payback period. (a) ___ / (b) ___ = payback period (c) ___ / (d) ___ = (e) ___ years

a. Initial investment b. Expected annual net cash inflow c. 2,464,000 d. 308,000 e. 8 years

The future value of the annuity is (a) ___ than the future value of the lump sum investment. The (b) ___ earned interest over the full three (c) ___ earned interest only as the installments were received over the course of three (d) ___ the cash is​ invested, the (e) ___ interest is earned. The investor lets time do the work.

a. lower b. lump-sum investment c. annuity d. sonner e. more