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“Tam Company is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in cash-operating costs if the equipment were acquired. The equipment’s estimated useful life is 10 years, with no residual value, and would be depreciated by the straight-line method. Tam’s predetermined minimum desired rate of return is 12%. Present value of an annuity of 1 at 12% for 10 periods is 5.65. Present value of 1 due in 10 periods at 12% is .322. Ignore income taxes. 110. Payback period is: a. 4.0 years. b. 4.4 years. c. 4.5 years. d. 5.0 years.”,”4Payback Period = Purchase Price = $100,000 = 5 yearsCash Saved 20

Managerial Accounting

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“Carlson Manufacturing has some equipment that needs to be rebuilt or replaced. The following information has been gathered relative to this decision: Present Equipment New Equipment Purchase cost new $50,000 $48,000 Remaining book value $30,000 – Cost to rebuild now $25,000 – Major maintenance at the end of 3 years $ 8,000 $ 5,000 Annual cash operating costs $10,000 $ 8,000 Salvage value at the end of 5 years $ 3,000 $ 7,000 Salvage value now $ 9,000 – Carlson uses the total-cost approach and a discount rate of 12% in making capital budgeting decisions. Regardless of which option is chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its domestic manufacturing operations and to move these operations to foreign countries.108. If the equipment is rebuilt, the present value of all cash flows that occur now is: a. $(55,000). b. $(25,000). c. $(16,000). d. $(23,000).”,”2If the equipment is rebuilt, the present value of all cash flows that occur now: = $25

Managerial Accounting

Average Rating 0 out of 5 stars. 0 votes.You must log in to submit a review.“Carlson Manufacturing has some equipment[…]

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“Carlson Manufacturing has some equipment that needs to be rebuilt or replaced. The following information has been gathered relative to this decision: Present Equipment New Equipment Purchase cost new $50,000 $48,000 Remaining book value $30,000 – Cost to rebuild now $25,000 – Major maintenance at the end of 3 years $ 8,000 $ 5,000 Annual cash operating costs $10,000 $ 8,000 Salvage value at the end of 5 years $ 3,000 $ 7,000 Salvage value now $ 9,000 – Carlson uses the total-cost approach and a discount rate of 12% in making capital budgeting decisions. Regardless of which option is chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its domestic manufacturing operations and to move these operations to foreign countries.107. If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is: a. $(28,840). b. $(19,160). c. $(14,420). d. $(36,050).”,”1The present value of the annual cash operating expense = 8,000 x 3.605 = $28

Managerial Accounting

Average Rating 0 out of 5 stars. 0 votes.You must log in to submit a review.“Carlson Manufacturing has some equipment[…]

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“Carlson Manufacturing has some equipment that needs to be rebuilt or replaced. The following information has been gathered relative to this decision: Present Equipment New Equipment Purchase cost new $50,000 $48,000 Remaining book value $30,000 – Cost to rebuild now $25,000 – Major maintenance at the end of 3 years $ 8,000 $ 5,000 Annual cash operating costs $10,000 $ 8,000 Salvage value at the end of 5 years $ 3,000 $ 7,000 Salvage value now $ 9,000 – Carlson uses the total-cost approach and a discount rate of 12% in making capital budgeting decisions. Regardless of which option is chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its domestic manufacturing operations and to move these operations to foreign countries.106. If the new equipment is purchased, the present value of all cash flows that occur now is: a. $(48,000). b. $(39,000). c. $(41,000). d. $(37,000).”,”2If the new machine is purchased the present value of all the cash flows that occur now will equal the price of the new machine minus the selling price of the old machine.$48,000 – $9,000 = $ 39

Managerial Accounting

Average Rating 0 out of 5 stars. 0 votes.You must log in to submit a review.“Carlson Manufacturing has some equipment[…]

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“Wilson Company is considering an investment in a machine costing $300,000. The machine has an estimated useful life of seven years at the end of which it will have a salvage value of $15,000. Anticipated yearly revenues associated with the machine amount to $250,000. Yearly costs amount to $150,000. Extra maintenance costs of $60,000 will be incurred at the end of the second and fourth years. 105. The present value of the $15,000 salvage value using a discount rate of 12% is: a. $15,000. b. $7,605. c. $6,780. d. $6,060.”,”3Present Value of Salvage Value: = 15000 x .452 = $6

Managerial Accounting

Average Rating 0 out of 5 stars. 0 votes.You must log in to submit a review.“Wilson Company is considering an[…]

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