Petroleum drilling equipment costs a company $125,000. The equipment has an estimated salvage value of $30,000. What is the allowable depreciation for this equipment in year 3? a. $18, 240 b. $19,000 c. $24,000 d. $25,000
Q: Question 2 Novak Ltd expects its new tennis racquet will give it a significant first mover advantage…
A:
Q: Acme Co has decided to make an investment into the electric bicycle business. Acme will need to…
A: The excess of any project or investment's cash flow's present value over the initial investment…
Q: Question 19 Firm A is a well-established auto-maker with a few models that sell very well. It also…
A: The Firm pays a dividend to the shareholders. The dividend is the distribution of profit to the…
Q: b. Pearl is investing in a 5-year certificate of deposit that earns 3.6% APR compounded monthly. If…
A: Present value refers to the current value of an asset present at some future date. It is helpful for…
Q: You are to compare two mutual funds' performance: Mutual Fund A has 15% return and 11% standard…
A:
Q: lating the WACC a. Calculate the cost of each capital component, that is, the after-tax cost of…
A: Calculation for weights ( by dividing the amount invested by the total capital) Debt =$…
Q: Which of the below statements is FALSE? OA. A synergy gain occurs when a new product can be…
A: Several statements have been given. We have to find the one that's false. We will examine each…
Q: Cash Flows from Operating Activities-Indirect Method Staley Inc. reported the following data: Net…
A: The question is related to Cash Flow Statement. Cash Flow Statement is summary of cash receipts and…
Q: Evangeline, an 80-year-old widow living alone, has a fixed income of $11,000 per year from social…
A: Homestead exemption may be defined as property laws which prevents a homeowner from losing her…
Q: Sally's favorite department store is offering an incredible deal this week on their store credit…
A: Answer The store has the biggest sales of the year and store is offering 50% off on spent of $100.…
Q: Complete the following table: (Use Table 15.1.) Note: Round your intermediate calculations and…
A: A loan is a financial arrangement in which one or more people, companies, or other entities lend…
Q: Acme is looking to acquire Pinder Co now. Acme is expected to generate annual cash flows of…
A: Operating cash flow (OCF) is a measurement of how much money a company generates through regular…
Q: Who benefits from technical analysis, and what is its purpose? Describe how and why technicians use…
A: Technical Analysis The analysis used to evaluate the current investment is known as technical…
Q: A retail coffee company is planning to open 110 new coffee outlets that are expected to generate…
A: Free cash flow per year is $15.9 million per year The growth rate is 3.5% WACC is 9.5% To Find: NPV…
Q: (15) The is the stock price minus exercise price, or the profit that could be attained by immediate…
A: An in the money call option is one which is making profit and the spot/stock price is above the…
Q: Corcovado Pharmaceutical’s cost of debt is 7%. The risk-free rate of interest is 3%. The expected…
A: Solution: Given, Pre- tax cost of debt = 7% Tax rate = 25% Post - tax cost of debt = Kd = Pre - tax…
Q: The common stock of Escapist Films sells for $25 a share and offers the following payoffs next year:…
A: Solution: Calculation of Expected rate of return of each stock is calculated State of economy…
Q: Discuss the similarities and differences in depository institutions and non-depository institutions
A: Depository institutions and non-depository institutions The financial institution that receives…
Q: Chatham Automotive purchased new electric forklifts to move steel automobile parts two years ago.…
A: Concept. EAC .( equated annual cost). equated annual cost is used to compare two alternatives .…
Q: investment account: Date Value Immediately Before Deposit Deposit January 1 July 1 December 31 45 54…
A: Investors invest money to earn interest and dividends. The rate of return is the return rate on…
Q: Financial analysts forecast Safeco Corp's (SAF) growth rate for the future to be 8 percent. Safeco's…
A: The dividend discount model (DDM), a mathematical technique for predicting the price of a company's…
Q: Complete the following, using ordinary interest. (Use Days in a year table.) Note: Do not round…
A: The question is related to Time Value of Money. The simple Interest is calculated with the help of…
Q: ent cash flows o
A: Given =annuity =525, Interest 9.5%, Duration = 6 years, Payment = yearly. So the Present value…
Q: Hancock Toy Co. had Net Income of $500,000 and paid cash dividends of $200,000 during this year.…
A: Ending equity is calculated using following equation Ending equity for the year = Beginning of the…
Q: 4. You would like to retire in 30 years with $1,000,000. Your financial advisor offers these two…
A: Concept. Future value of annuity = A ×[ (1+r)n -1 ] ÷r Where, A = timely payment r = interest rate…
Q: You are considering the purchase of a condominium to use as a rental property. You estimate that you…
A: Mortgage A mortgage is an agreement between the lender and the borrower in which the lender lent…
Q: You want to retire with $400 000 in the bank and you are able to earn 6% compounded quarterly for…
A: The amount to be invested today is calculated using present value equation below Present value =…
Q: The two major bond rating agencies are Moody's and S&P l. Explain how they rate bonds and why it's…
A: A Bond is a financial instrument (Contract) in which the bond purchaser lends money to the companies…
Q: 2. What effect could be the following changes, occurring independently, have on (i) contribution…
A: According to bartleby guidelines, if question involves multiple subparts, then 1st sub 3 parts needs…
Q: Suppose x1, x2, and x3 are binary variables that are equal to 1 if the corresponding project (1, 2,…
A: Investment in a project is a capital budgeting decision. Capital budgeting refers to ascertaining in…
Q: Complete the following table: Purchase price of product Landcruiser Down payment Amount financed…
A: The question is related Interest Cost. The Total Finance Charges is calculated with the help of…
Q: Find the present value at outset of a level annuity of £1500 per year, payable annually in arrears…
A: The money's time value concept states that any sum of money is worth more now as compared to what it…
Q: In a recent 5-year period, mutual fund manager Diana Sauros produced the following percentage rates…
A: Average return and standard deviation are metrics that help in analyzing a portfolio of returns. The…
Q: Empirical evidence suggests that IPO issues are generally: priced efficiently by the market.…
A: Empirical evidence refers to teh information that is obtained after the observation and the…
Q: Sawyer, the CEO of the Sawyer Group, is initiating planning for the company's operations next year,…
A: The company needs growth of sales and growth of profit because the growth will create value for…
Q: An investment portfolio of stocks and bonds, with an initial investment of $90,000, gained $8810…
A: Let the investment in stock be a Investment in bonds = $90000-a Total gain = Gain on stock + Gain on…
Q: Caroline has just turned 22 and has begun her first job. Her first year’s salary is $60,000 per…
A: The concept of money's time worth reveals that any sum of money is worth more now than its worth in…
Q: A company with four equal share co-founders creates an Employee Stock Option Pool including up to…
A: Employee stock options are options given by companies to employees to purchase company shares at…
Q: management of Advanced Alternative Power Inc. is considering two capital investment projects. The…
A: Net present value is time value based capital budgeting method and most used capital budgeting…
Q: Wilco acquires a 80% interest in Seminol Cor book value of Seminole's identifiable net assets at…
A: Noncontrolling interest refers to the ownership position in the company showing in the form of a…
Q: Common stock value—Variable growth Lawrence Industries' most recent annual dividend was $1.04…
A: Solution: Annual dividend per share = D0 = $1.04 Growth rate of dividend for 3 years = g =30%p.a…
Q: What is the total revenue of the company without the put option hedge and with the put option hedge?…
A: The put option hedge comes with a cost i.e. the premium cost of the option. Without the put option…
Q: Using a two-step binomial tree, calculate the value of an American call option where the underlying…
A: An option is a type of financial instrument that is based on the value of underlying securities,…
Q: Determine EVA when net operating porofit is $1128000 initial cost of investment is $55 lakh & cost…
A: Solution: Given, Net Operating Profit = NOPAT =$11,28,000 Initial cost of investment = Capital…
Q: Maggie's Muffins Bakery generated $4 million in sales during 2019, and its year-end total assets…
A: concept. self-supporting growth rate = (Profit margin×Retention ratio×Current sales)(total…
Q: 9. When we use the WACC to assess a project, we assume that the ________ ratio does not change.…
A: WACC is used to understand the feasibility of a project and is concerned with debt, equity…
Q: fall within what range? Between 0% and 36% Between-36% and 72% Between-18% and 54%
A: Standard deviation is the measure risk of return from the stock and how much is deviation from mean…
Q: Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain…
A: The process through which an individual analyzes and evaluates the profitability of any alternative…
Q: The spot rate for the British pound is £.7199 = $1 and the Canadian dollar is Can$1.1022 = $1. What…
A: £/$ = 0.7199 Can$/$ = 1.1022 Cross rate £/Can$ = ?
Q: 3) Tired of being broke: Suppose your client "wants" to deposit $10,000 into a bank that pays them…
A: This relates to the application of time value of money. The amount being deposited in the bank will…
Petroleum drilling equipment costs a company $125,000. The equipment has an estimated salvage value of $30,000. What is the allowable
$18, 240
$19,000
$24,000
$25,000
A project costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 in year 1, increasing by $4000 each year. What is the PW of this project? I = 12%
$12, 338
$150, 377
$-150,260
$2731
Step by step
Solved in 2 steps
- After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that could result in environmental damage. Before proceeding with the extraction, CTC must spend 900,000 for new mining equipment and pay 165,000 for its installation. The mined gold will net the firm an estimated 350,000 each year for the 5-year life of the vein. CTCs cost of capital is 14%. For the purposes of this problem, assume that the cash inflows occur at the end of the year. a. What are the projects NPV and IRR? b. Should this project be undertaken if environmental impacts were not a consideration? c. How should environmental effects be considered when evaluating this or any other project? How might these concepts affect the decision in part b?The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.
- Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.Underwoods Miners recently purchased the rights to a diamond mine. It is estimated that there are two million tons of ore within the mine. Underwoods paid $46,000,000 for the rights and expects to harvest the ore over the next fifteen years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 900,000 tons Year 3: 400,000 tons Year 4: 210,000 tons Year 5: 150,000 tons Calculate the depletion expense for the next five years and create the journal entry for year one.Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
- Crane's Custom Construction Company is considering three new projects, each requiring an equipment investment of $27,280. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $8,680 $12,400 $16,120 2 11,160 12,400 14,880 3 14,880 12,400 13,640 Total $34,720 $37,200 $44,640 The equipment's salvage value is zero, and Crane uses straight-line depreciation. Crane will not accept any project with a cash payback period over 2 years. Crane's required rate of return is 12%. Click here to view PV table. (a) Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) AA BB BB years years CC yearsTrailer Treasures Inc. is considering two projects and must do one of them. Project A requires an investment of $35,000. Estimated annual receipts for 5 years are $14,000; estimated annual costs are $4,500. Alternatively, Project B requires an investment of $70,000 has annual receipts for 5 years of $20,000, and has annual costs of $4,500. Assume both proejcts have $10,000 salvage value and that MARR IS 15%/year. 1. What is the annual worth of Project A? 2. What is the annual worth of Project B? 3. Which project should be recommended? Why? Please show work through excelDoug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $ 22,660. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $7,210 $ 10,300 $ 13,390 9,270 10,300 12,360 3 12,360 10,300 11,330 Total $ 28,840 $ 30,900 $ 37,080 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. Click here to view the factor table. (a) Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) AA years BB years CC years Which is the most desirable project? The most desirable project based on payback period is Which is the least desirable project? The least desirable project based on payback period is (b) Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or…
- A piece of equipment has an initial cost of $125,000. The annual 0&M costs are $31,000 and increase $1000 per year. The annual revenue is $45,000 and increase $1,500 per year. The equipment has a life span of 8 years and a salvage value of $30,000. Based on a MARR of 5%, determine the following: a. If the project is viable based on Net Present Worth. b. Determine the amount the annual revenue has to be increased to make the project viable. c. Determine the amount the salvage value has to increase to make the project viable.A new absorption chiller system costs $360,000 and will save $52,500 in each of the next 12 years. The asset is classified as a seven-year MACRS property for depreciation purposes. The expected salvage value is $20,000. The firm pays taxes at a combined rate of 40% and has an MARR of 12%. What is the net present worth of the system?(a) $46,725(b) $63,739(c) $62,112(d) $53,317Henerhiya Co. is planning to buy a machine costing P84,000 to be depreciated on the straight-line method basis over 10 degrees years life. The related cash flow from operations, net of income taxes, is expected to be P10,000 a year for each of the first 6 years and P12,000 for the next 4 years. It was also estimated that the salvage value of the project at the end of year 1 to be P60,000 and decreases by P5,000 each year thereafter, provided further that at the end of 10 years, the machine has no salvage value. Compute the payback bailout period in years.
