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Q: Which capital investment methods require the use of a present value table?
A: Net Present Value: It is a measure of profitability for a project used primarily in capital…
Q: Explain how the cost of capital serves as a screening tool when using (a) the net present value…
A: Cost of capital: Cost of capital is the required return necessary to make a capital budgeting…
Q: Define risk-adjusted cost of capital (r)
A: Risk adjusted cost of capital is the measure of returns of a project relative to the risks of a…
Q: Explain what net operating working capital is, and explain how changes in that quantity can affect…
A: Net operating working capital is defined as excess of current operating assets over current…
Q: Why is it important to match your funding with economic life of corresponding asset?
A: The use of assets economic life matching with funding can be an integral tool for financial…
Q: What distinguishes a capital investment from other investments?
A: Investments: It is the method by which an investor increases his value over some time for future…
Q: Define the term capitalized cost?
A: A Capitalized Cost is the cost incurred in the purchase and financing of fixed assets. It includes…
Q: Write the capitalized-cost equation?
A: Answer: Capitalized cost is well-defined as the present value of an annual cost constant over an…
Q: Find 'return on invested capital'.
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Q: Explain how the cost of capital serves as a screening tool when using the net present value method.
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Q: . How are the component costs combined to forma weighted average cost of capital (WACC),and why is…
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A: capital financing is the form of business finance that is raised through equity funds and lenders…
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A: Capitalization rate: Capitalization rate is the projected rate of return percentage that a property…
Q: The net present value of an investment represents the difference between the:
A: The Answer :
Q: Explain the process of Return on Invested Capital?
A: It represents the amount of return earned by all the investors. It can be calculated by dividing…
Q: Define capital intensity ratio
A: Formula to compute capital intensity ratio:
Q: Define the term Paid-in capital?
A: Stockholders’ equity: Stockholders’ equity is referred to as the claims of the stockholders on the…
Q: Derivation of capital asset pricing model
A: The Capital Asset Pricing Model (CAPM) relates the returns on individual assets or entire portfolios…
Q: Capital Asset Pricing Model
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A: The total cost of financing current projects (or projects under consideration) will be the financial…
Q: Explain Initial Capital Contributions with example?
A: Initial contributions are generally made by members to take part in the company's interests. Many…
Q: What is the return on invested capital (RIC)?
A: Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in…
Q: Explain the blended capitalization rate and where it can be applied?
A: The rate which is a combination of the previous rate and the new rate charged on a loan is called a…
Q: How to make capital investment choices based on the internal rate of return (IRR)
A: Capital investment choices based on the internal rate of return (IRR) will be explained:
Q: asset
A: The term CAPM or capitam asset pricing model is a model which shows the relationship between risk…
Q: The estimated capitalized cost is $
A: A stream of equal cash flows paid or received periodically is termed as annuity. Annuity is either…
Q: What is an example or scenarios of Capital Allocation Line (CAL)?
A:
Q: Define paid-in capital
A: Definition: Stockholders’ equity: Stockholders’ equity is referred to as the claims of the…
Q: how was capital asset pricing model (CAPM) created? GIVE reference
A: Meaning CAPM Capital asset pricing model, It is created to explain the investor that he/she will get…
Q: Explain the concept of capital budgeting
A: Capital budgeting is additionally called investment appraisal utilized in evaluating major…
Q: Capital; capital structure; optimal capital structure
A: Capital: Ownership of assets of financial nature is termed as capital. Capital can be used for…
Q: What is the Return on Invested Capital?
A: Return on invested capital is calculated or determined to know the efficiency of the company on…
Q: purpose for capital analysis
A: Capital analysis is the study of capital structure of a business entity.
Q: How capital expenditure(investment) analysis helps in evaluating the inflows and outflows of cash?
A: Capital expenditure is a sort of investment in the business either by making a new product line or…
Q: How is the CAPM (Capital Asset Pricing Model) related to valuation?
A: The relationship between systematic risk and expected return on assets, particularly equities, is…
Q: What is a target capital structure?
A: Capital structure is the combination of debt and equity used by the company to finance its business.
Q: Define the term, the return on invested capital (RIC)?
A: All investments are made keeping focus on the expected returns that can be generated from it. The…
Q: Explain the term Return on Invested Capital?
A: The formula used to compute return on invested capital:
Q: Describe the concept of rate of return based on the return on invested capital in terms of a…
A: The term ROIC is used to calculate the profitability or return on invested capital that a business…
Q: Briefly discuss capital asset price model from the standpoint of investors and managers.
A: CAPM from standpoint of managers : Capital asset pricing model is of high value for financial…
Q: Which of the following is a present value method of analyzing capital investment proposals? Uaverage…
A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…
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- A lessee has developed the following information regarding a lease contract, with payments due at the beginning of the period. Use this information to determine the amount at which the lease obligation will initially be recorded. Description Amount Present value Present value of total of annuity due amount Annual lease $4,500 S16.528 S14,258 payment Discount rate 6% Number of periods 4 Purchase option $300 S238 Group of answer choices: 18,000 14,495 16,528 14,258 18,300 16,766Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor’s implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 12 20 3 Lessor's rate of return (known by lessee) 10% 8% 11% Lessee's incremental borrowing rate 11% 9% 10% Fair value of lease asset $650,000 $1,005,000 $210,000 Required:a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. (Round your answers to the nearest whole dollar.)Wildhorse Manufacturing Ltd. has signed a lease agreement with Blossom Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows The lease is for 5 years commencing January 1, 2023 Wildhorse must pay Blossom $59,445 on January 1 of each year, beginning in 2023 Equipment of this type normally has an economic life of 6 years. Blossom has concluded based on its review of Wildhorse's financial statements, that there is no unusual credit risk in this situation Blossoms will not incur any further costs with regard to this leas Blossom purchases this equipment directly from the manufacturer at a cost of $225,329, and normally sells the equipment for $275,429 Wildhorse's borrowing rate is 7%. Blossom's impiled interest rate is 6%, which is known to Wildhorse at the time of negotiating the lease Wildhorse uses the straight-line method to depreciate similar equipment. Both Wildhorse and Blossom have calendar fiscal years (year end December 31), and…
- 3. the information below relates to a sales type lease in which lease payments are made semiannually at the beginning of each period Lease term Lessor's desired rate of return Lesse's incremental borrowing rate Current fair market value of leased asset 5 years 12% per year 10% per year $600,000 Based on the information above, calculate the amount of the semi-annual payment as determined by the lessor.Each of the four independent situations below describes a finance lease in which annual lease payments are pay- able at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Situation Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value 1 4 10% $50,000 $50,000 0 2 7 11% $350,000 $350,000 $ 50,000 0 3 5 9% $75,000 $45,000 $7,000 $7,000 Required: For each situation, determine: a. The amount of the annual lease payments as calculated by the lessor. b. The amount the lessee would record as a right-of-use asset and a lease liability. 4 8 12% $465,000 $465,000 10 $ 45,000 $ 50,000Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $1,500 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years. Lease Cash Effective Decrease in Outstanding Payment Payment Interest Balance Balance 40,860 31,960 24,978 17,577 9,731 ?? 0 1 2 3 4 5 6 8,900 8,900 8,900 8,900 8,900 1,500 Multiple Choice $46,000 ?? 1,918 1,499 1,055 What is the total interest paid over the term of the lease? $2.760 ?? 85 ?? 6,982 7,401 7,845 ?? 1,415
- Each of the independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit interest rate. Lease term Lessor's desired rate of return Lessee's incremental borrowing rate Fair value of asset Periods; interest rate 10 periods, 10% 10 periods, 12% 20 periods, 10% 20 periods, 12% Annual lease payment 1 Lessee 10 years For convenience, here are some table values: 10% $ 600,000 5.6502 8.5136 7.4694 12% Situation PV, ordinary PV, annuity annuity due 6.1446 6.7590 6.3283 9.3649 8.3658 Situation 1 2 Lessor Situation 2 20 years 12% Required: For each situation determine the amount of the annual lease payment, as calculated by the lessor. Note: Round your answers to the nearest whole dollar amounts. 10% $ 400,000Assume for a particular capital lease the unpaid lease obligation at the beginning of the year was OMR 353,000 and a OMR78,000 lease payment is made at the end of each year. If the lease has an implicit interest rate of 10% per annum, the end of year payment would be recorded as your book.Each of the three Independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. (FV of $1, PV of $1, EVA of $1, PVA of $1, EVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provided.) Situation 1 2 Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset 10 20 11% 9% 12% 12% 10% 11% $720,000 $1,100,000 $305,000 Requlred: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease llability, for each of the above situatlons. (Round your answers to the nearest whole dollar.) Right of-use Asset/Lease Payable Lease Payments Situation 1 Situation 2 Situation 3
- Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of S1, PVA of $1. EVAD of $1 and PVAD of $1) Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value. Guaranteed fair value Situation 1 Situation 2 Situation 3 Situation 4 1 Lease Payments 6 10% $ 58,000 $ 58,000 e 0 2 Situation 9 11% $ 358,000 $ 358,000 $ 58,000 Residual Value PV of Lease Guarantee Payments 0 7 9% $ 83,000 $ 53,000 $ 15,000 $ 15,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar amount. PV of…Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,300 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years. Lease Payment Cash Payment Effective Interest Decrease in Balance Outstanding Balance 32,350 1 7,000 ?? ?? 25,350 2 7,000 1,775 5,225 20,125 3 7,000 1,409 5,591 14,534 4 7,000 1,017 5,983 8,551 5 7,000 ?? ?? ?? 6 2,300 150 2,150 0 What is the outstanding balance after payment 5? $2,150. $2,300. $2,450. $4,450.Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor's implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 1 Situation 2 Situation 3 $ $ $ X Answer is not complete. Lease Payments Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. (Round your answers to the nearest whole dollar.) 4,769,583 X 8,816,264 X 729,076 x 1 12 10% 11% $700,000 Right-of-use Asset/Lease Payable Situation 2 15 8% 9% $1,030,000 3 4 11% 10% $235,000