A company is considering the purchase of a new machine for $49,000. Management predicts that the machine can produce sales of $16,100 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $7,900 per year including depreciation of $4,100 per year. Income tax expense is $3,280 per year based on a tax rate of 40%. What is the payback period for the new machine?

Answers

Answer 1

Answer:

7.47 years

Explanation:

Payback period calculates the amount of the time it takes to recover the amount invested in a project from its cumulative cash flows.

= amount invested / cash flows

To derive cash flow: (S - C - D) x (1 - t) + D

S = sales = $16,100

C = Cost of goods sold = $7,900

D = deprecation = $4,100

T = tax = 40%

$16,100 - $7,900 - $4,100 = $4100

$4100 × 0.6 = $2460

$2460 + $4,100 = $6560

$49,000 / $6560 = 7.47 years

I hope my answer helps you

Related Questions

Perfect Confectionery Co. expects to earn $3.20 per share during the current year, its expected dividend payout ratio (i.e., the proportion of earnings paid out as dividend) is 60%, its expected constant dividend growth rate is 5.0%, and its common stock currently sells for $30.00 per share. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of equity from new common stock? 10.73% 11.29% 11.82% 12.11% 12.67%
Ernest invents a novel, useful, nonobvious product. He:____.a. must apply for a patent within one year of selling the product commercially. b. may receive patent protection for two years by filing a simpler, shorter, cheaper provisional patent application while he is working on his complex, regular patent application. c. is entitled to a patent over someone else who invents the same product if he is the first to invent it. d. may sell his product for up to five years to see how well it sells before going through the complex process of filing a patent application with the PTO Office.
Which of the following accounts will usually appear in the post-closing trial balance? a. Accounts Receivable b. Cash c. Depreciation Expense d. Fees Earned e. Doug Woods, Capital f. Doug Woods, Drawing g. Equipment h. Land i. Salaries Payable j. Unearned Rent k. Wages Expense
A bond has a standard deviation of 10.7 percent and an average rate of return of 6.4 percent. What is the coefficient of variation (CoV)
AAA Hardware uses the LIFO method to value its inventory. Inventory at the beginning of the year consisted of 16,000 units of the company’s one product. These units cost $10 each. During the year, 66,000 units were purchased at a cost of $13 each and 67,000 units were sold. Near the end of the fiscal year, management is considering the purchase of an additional 8,000 units at $13.a. What would be the effect of this purchase on income before income taxes? b. What would be the effect of this purchase on income before income taxes using FIFO method?

Gain is generally recognized in an asset distribution to a partner. True False

Answers

Answer:

False

Explanation:

Usually distributions reduce a partner's outside basis in a partnership, they are generally not considered income. Since most distributions are not considered income, they do not result in gains for the partner. Some distributions may result in gains, such as certain cash distributions or securities (bonds) distributions. It is uncommon for a gain to result from property being distributed.

Debt contracts:A) are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.B) have a higher cost of state verification than equity contracts.C) are used less frequently to raise capital than are equity contracts.D) never result in a loss for the lender.

Answers

Answer:

A) are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.

Explanation:

Debt contracts are formed when a borrower agrees to repay a lender. Convenants are usually used to settle disputes between the borrower and the lender. Convenants limits the the extent to which debtors take risks, dividend payouts, claim dilution, and other activities that can cause the lender to lose money.

Debt contracts are obtained by businesses to finance short term operations activities or long term expansion plans.

Answer: A) are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.

Explanation: A debt contract is an agreement in which a borrower agrees to repay funds borrowed to a lender. Usually classes into a short-term and long-term debt contracts, they are used in raising money for working capital or capital expenditures and in return for lending the money, the individuals or institutions become creditors and receive a promise that the capital and interest on the debt will be repaid (usually in fixed amounts over a period of time) in accordance with the terms of the contract. Debt contracts include detailed provisions on collateral involved, interest rate, the schedule for interest payments, and the timeframe to maturity if applicable.

Problem 15-11 The yield to maturity on 1-year zero-coupon bonds is currently 8.5%; the YTM on 2-year zeros is 9.5%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 11%. The face value of the bond is $100. a. At what price will the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will the yield to maturity on the bond be? (Do not round intermediate calculations. Round your answer to 3 decimal places.) c. If the expectations theory of the yield curve is correct, what is the market expectation of the price that the bond will sell for next year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Recalculate your answer to (c) if you believe in the liquidity preference theory and you believe that the liquidity premium is 1.5%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answers

Answer:

a. At what price will the bond sell?

$102.71

b. What will the yield to maturity on the bond be?

0.0952 or 9.52%

c. If the expectations theory of the yield curve is correct, what is the market expectation of the price that the bond will sell for next year?

$101.37

d. Recalculate your answer to (c) if you believe in the liquidity preference theory and you believe that the liquidity premium is 1.5%.

$102.78

Explanation:

current YTM for zero coupon bonds = 8.5% for 1 year bonds and 9.5% on 2 year bonds

The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 11%. The face value of the bond is $100.

bond price = PV of maturity value + PV coupons

$100 / (1 + 9.5%)² = $83.40
[$11 / (1 + 8.5%)] + [$11 / (1 + 9.5%)²] = $10.14 + $9.17 = $19.31
issue price = $83.40 + $19.40 = $102.71

YTM = [C + (FV - PV)/n] / [(FV + PV)/2] = [11 + (100 - 102.71)/2] / [(100 + 102.71)/2] = 0.0952 or 9.52%

next year's price:

$100 / (1 + 9.5%) = $91.32
$11 / (1 + 9.5%) = $10.05
total = 101.37

next year's price if you believe in liquidity preference theory (1.5%):

$100 / (1 + 9.5% - 1.5%) = $92.59
$11 / (1 + 9.5% - 1.5%) = $10.19
total = $102.78

The Kilp Sisters Trust is required to distribute $60,000 annually equally to its two income beneficiaries, Clare and Renee. If trust income is not sufficient to pay these amounts, the trustee can invade corpus to the extent necessary. During the current year, the trust generates only taxable interest income and records DNI of $160,000; the trustee distributes $30,000 to Clare and $150,000 to Renee. a. How much of the $150,000 distributed to Renee is included in her gross income? $.
b. How much of the $30,000 distributed to Clare is included in her gross income? $ is included in her gross income.
c. The distributions which are composed of trust accounting income that is required to be distributed currently come under .

Answers

Answer:

Results for Renee are as follows:

After the first tier distributions ($60000/2 = $30000 to each income beneficiaries) are accounted for, $100000 DNI remains to be assigned to the beneficiaries on the second tier ($160000 DNI - $60000 DNI used for first tier distribution).

Amount received DNI received = Gross income,

portfolio income

First tier $30,000.00 $30,000.00

Second tier $1,20,000.00 $ 1,00,000.00

Total $1,50,000.00 $ 1,30,000.00

Results for Clare are as follows:

Amount received DNI received = Gross income,

portfolio income

First tier $30,000.00 $ 30,000.00

Second tier $ - $ -

Total $30,000.00 $ 30,000.00

The distributions which are composed of trust accounting income that is required to be distributed currently come under First Tier Distribution.

If a painter who is contracted to paint the exterior of a house does NOT finish the job, he has violated his duty to ________.

Answers

If a painter who is contracted to paint the exterior of a house does NOT finish the job, he has violated his duty to perform.

On January 2, 2020, real property taxes were levied for the year in the amount of $1,878,700. It was estimated that 2 percent of the levy would be uncollectible. Required: Record this transaction in both the General Fund and governmental activities journal. (Note: Type 4-a-1 as the paragraph number in the [Add description] field for this entry; 4-a-2 for the next transaction, etc. Careful referencing by paragraph number is very helpful should you need to determine where you may have omitted a required journal entry or made an error.) For the General Fund you will be directed to the Detail Journal. Select "Accrued Revenue" in the drop down [Description] menu in the Detail Journal related to the General Fund entry.