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122. (Ignore income taxes in this problem.) Lajeunesse Limos, Inc., is considering the purchase of a limousine that would cost $195,661, would have a useful life of 9 years, and would have no salvage value. The limousine would bring in cash inflows of $47,000 per year in excess of its cash operating costs. Required: Determine the internal rate of return on the investment in the new limousine. Show your work! 14-51 Determine the internal rate of return on the investment in the new automated molding machine. Show your work! 124. (Ignore income taxes in this problem.) The management of an amusement park is considering purchasing a new ride for $40,000 that would have a useful life of 15 years and a salvage value of $6,000. The ride would require annual operating costs of $22,000 throughout its useful life. The company’s discount rate is 12%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly since customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new customers. Required: How much additional revenue would the ride have to generate per year to make it an attractive investment? 14-52 Required: a. Ignoring any salvage value, how large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive? b. Ignoring any cash flows from intangible benefits, how large would the salvage value of the automated equipment have to be to make the investment in the automated equipment financially attractive? 126. (Ignore income taxes in this problem.) The management of Kniffin Corporation is investigating the purchase of a new satellite routing system with a useful life of 9 years. The company uses a discount rate of 9% in its capital budgeting. The net present value of the investment, excluding its intangible benefits, is -$717,002. Required: How large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive? 14-53 How large would the salvage value of the telecommunications equipment have to be to make the investment in the telecommunications equipment financially attractive? 128. (Ignore income taxes in this problem.) Mcniel Corporation is considering the following three investment projects: Required: Rank the investment projects using the project profitability index. Show your work! 14-54 The only cash outflows are the initial investments in the projects. Required: Rank the investment projects using the project profitability index. Show your work 14-55 Required: a. Compute the payback period on the new equipment. b. Compute the simple rate of return on the new equipment. 131. (Ignore income taxes in this problem.) Sloman Company is considering purchasing a machine that would cost $436,800 and have a useful life of 5 years. The machine would reduce cash operating costs by $132,364 per year. The machine would have no salvage value. Required: a. Compute the payback period for the machine. b. Compute the simple rate of return for the machine. 14-56 a. Compute the payback period for the machine. b. Compute the simple rate of return for the machine. 133. (Ignore income taxes in this problem.) Whitmarsh Corporation is considering a project that would require an initial investment of $334,000 and would last for 9 years. The incremental annual revenues and expenses for each of the 9 years would be as follows: At the end of the project, the scrap value of the project’s assets would be $10,000. Required: Determine the payback period of the project. Show your work! 14-57 Required: Determine the payback period of the project. Show your work! 135. (Ignore income taxes in this problem.) Varnes Corporation is contemplating purchasing equipment that would increase sales revenues by $217,000 per year and cash operating expenses by $109,000 per year. The equipment would cost $324,000 and have a 6 year life with no salvage value. The annual depreciation would be $54,000. Required: Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work! 14-58 Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work! 137. (Ignore income taxes in this problem.) Seastrand Corporation is investigating automating a process by purchasing a new machine for $322,000 that would have a 7 year useful life and no salvage value. By automating the process, the company would save $117,000 per year in cash operating costs. The company’s current equipment would be sold for scrap now, yielding $17,000. The annual depreciation on the new machine would be $46,000. Required: Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work! 14-59 Required: Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work!

122. (Ignore income taxes in this problem.) Lajeunesse Limos, Inc., is considering the purchase of a limousine that would cost $195,661, would have a useful life of 9 years, and would have no salvage value. The limousine would bring in cash inflows of $47,000 per year in excess of its cash operating costs.

Required:

Determine the internal rate of return on the investment in the new limousine. Show your work!

14-51

 

Determine the internal rate of return on the investment in the new automated molding machine. Show your work!

124. (Ignore income taxes in this problem.) The management of an amusement park is considering purchasing a new ride for $40,000 that would have a useful life of 15 years and a salvage value of $6,000. The ride would require annual operating costs of $22,000 throughout its useful life. The company’s discount rate is 12%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly since customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new customers.

Required:

How much additional revenue would the ride have to generate per year to make it an attractive investment?

14-52

 

Required:

a. Ignoring any salvage value, how large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive?

b. Ignoring any cash flows from intangible benefits, how large would the salvage value of the automated equipment have to be to make the investment in the automated equipment financially attractive?

126. (Ignore income taxes in this problem.) The management of Kniffin Corporation is investigating the purchase of a new satellite routing system with a useful life of 9 years. The company uses a discount rate of 9% in its capital budgeting. The net present value of the investment, excluding its intangible benefits, is -$717,002.

Required:

How large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive?

 

14-53

 

How large would the salvage value of the telecommunications equipment have to be to make the investment in the telecommunications equipment financially attractive?

128. (Ignore income taxes in this problem.) Mcniel Corporation is considering the following three investment projects:

Required:

Rank the investment projects using the project profitability index. Show your work!

14-54

 

The only cash outflows are the initial investments in the projects. Required:

Rank the investment projects using the project profitability index. Show your work

14-55

 

Required:

a. Compute the payback period on the new equipment.

b. Compute the simple rate of return on the new equipment.

131. (Ignore income taxes in this problem.) Sloman Company is considering purchasing a machine that would cost $436,800 and have a useful life of 5 years. The machine would reduce cash operating costs by $132,364 per year. The machine would have no salvage value.

Required:

a. Compute the payback period for the machine.

b. Compute the simple rate of return for the machine.

14-56

 

a. Compute the payback period for the machine.

b. Compute the simple rate of return for the machine.

133. (Ignore income taxes in this problem.) Whitmarsh Corporation is considering a project that would require an initial investment of $334,000 and would last for 9 years. The incremental annual revenues and expenses for each of the 9 years would be as follows:

At the end of the project, the scrap value of the project’s assets would be $10,000.

Required:

Determine the payback period of the project. Show your work!

14-57

 

Required:

Determine the payback period of the project. Show your work!

135. (Ignore income taxes in this problem.) Varnes Corporation is contemplating purchasing equipment that would increase sales revenues by $217,000 per year and cash operating expenses by $109,000 per year. The equipment would cost $324,000 and have a 6 year life with no salvage value. The annual depreciation would be $54,000.

Required:

Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work!

 

14-58

 

Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work!

137. (Ignore income taxes in this problem.) Seastrand Corporation is investigating automating a process by purchasing a new machine for $322,000 that would have a 7 year useful life and no salvage value. By automating the process, the company would save $117,000 per year in cash operating costs. The company’s current equipment would be sold for scrap now, yielding $17,000. The annual depreciation on the new machine would be $46,000.

Required:

Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work!

14-59

 

Required:

Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work!

 

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