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 beprofitable, theinvestment's payback period must occur before theinvestment'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
