The Logan Publishing Corporation Is Contemplating the Acquisition of a State

question 83

Essay

The Logan Publishing Corporation is contemplating the acquisition of a state of the art printing press.The following information is relevant:
The cost of the printing press is $\$ 180,000$
The anticipated revenue from the printing press is $\$ 120,000$ per year. The useful life of the car washis 12 years.
Anmul operating costs are expected to be:

$\begin{array}{ll}\text { Salaries } &\$ 40,000 \\\text {Utilities } & 10,000 \\\text { Power usage } &4,600\\\text { Supplies } & 6,400\\\text { Repars/maintenance} &12,000\\\end{array}$

The firm uses straight-line depreciation
The salvage value for the car wash is zero.
The company's cutdf points are as follows:
\begin{array}{ll}\text { Payback } &4years \\\text {Accounting rate of return } & 16 \% \\\\text { Internal rate of retune } &16\%\\\\end{array}
Ignore income taxes.
Required:
a. $\text { Compute the annual cash inflow }$
b. $\text { Compute the net present value }$
c. $\text { Compute internal rate of retun }$
d. $\text { Compute the payback period }$
e. $\text { Compute the profitability index }$
f. $\text { Should the printing press be purchased. }$

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Definitions:

Specific Identification

A method for inventory costing and valuation that tracks the cost of individual items or batches of items.

First-In, First-Out

An inventory valuation method where goods purchased or produced first are sold or used first.

Inventory Method

Inventory methods are accounting approaches used to value and manage a company's inventory, including techniques like FIFO (First In, First Out) and LIFO (Last In, First Out).

Most Recent Costs

refers to the latest expenses incurred, often used in inventory valuation to assume that the costs of the most recently acquired items are the first to be assigned.