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In: Finance
Use this information to answer questions below: Cost Cutting: CBD Inc, a processor of CBD oils,...
Use this information to answer questions below: Cost Cutting: CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut costs. It can spend $1.5 Million today on the purchase and installation of a new automated processing line. The equipment will have a six-year life, at which time it can be sold for $250,000. The equipment qualifies as a Class 8 asset with a 20% CCA rate. Since the equipment will be purchased in 2020, it is subject to the Accelerated Investment Incentive rules, rather than the half-year rule. The benefit of installing the new equipment is a reduction in labor costs of $400,000 per year. The new process will lead to an immediate increase in Net Working Capital (NWC) of $25,000, which will be recovered at the conclusion of the project. The firm has a 30% corporate tax rate and it wants a 15% return. Should they undertake this cost-cutting program?
What is the correct value for Step #1? $1,500,000, $400,000, $1,525,000, $250,000
What is the correct value for Step #2? $1.059,655, $1,135,950, $1,366,245, $1,263,755
What is the correct value for Step #3? $376,650, $452,640, $273,913, $650,545
What is correct value for Step #4? $123,690, $85,631, $108,082, $98,654
What is correct value for Step #5? $18,528, $17,397, $20,635, $16,412
What is the correct value of Step #6? -$15,648, -$14,192, -$18,354, $17,369
What is the correct value for step #7? Reject- NPV is negative, Accept- NPV is positive, Accept NPV is negative, Reject- NPV is positive
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Cost Cutting: CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut...
Cost Cutting: CBD Inc, a processor of CBD oils,
is analyzing a potential opportunity to cut costs. It can spend
$1.5 Million today on the purchase and installation of a new
automated processing line. The equipment will have a six-year life,
at which time it can be sold for $250,000. The equipment qualifies
as a Class 8 asset with a 20% CCA rate. Since the equipment will be
purchased in 2020, it is subject to the Accelerated Investment
Incentive rules,...
Cost Cutting: CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut...
Cost Cutting: CBD Inc, a processor of CBD oils,
is analyzing a potential opportunity to cut costs. It can spend
$1.5 Million today on the purchase and installation of a new
automated processing line. The equipment will have a six-year life,
at which time it can be sold for $250,000. The equipment qualifies
as a Class 8 asset with a 20% CCA rate. Since the equipment will be
purchased in 2020, it is subject to the Accelerated Investment
Incentive rules,...
Cost Cutting: CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut...
Cost Cutting: CBD Inc, a processor of CBD oils,
is analyzing a potential opportunity to cut costs. It can spend
$1.5 Million today on the purchase and installation of a new
automated processing line. The equipment will have a six-year life,
at which time it can be sold for $250,000. The equipment qualifies
as a Class 8 asset with a 20% CCA rate. Since the equipment will be
purchased in 2020, it is subject to the Accelerated Investment
Incentive rules,...
Cost Cutting: CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut...
Cost Cutting: CBD Inc, a processor of CBD oils,
is analyzing a potential opportunity to cut costs. It can spend
$1.5 Million today on the purchase and installation of a new
automated processing line. The equipment will have a six-year life,
at which time it can be sold for $250,000. The equipment qualifies
as a Class 8 asset with a 20% CCA rate. Since the equipment will be
purchased in 2020, it is subject to the Accelerated Investment
Incentive rules,...
Cost Cutting: CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut...
Cost Cutting: CBD Inc, a processor of CBD oils,
is analyzing a potential opportunity to cut costs. It can spend
$1.5 Million today on the purchase and installation of a new
automated processing line. The equipment will have a six-year life,
at which time it can be sold for $250,000. The equipment qualifies
as a Class 8 asset with a 20% CCA rate. Since the equipment will be
purchased in 2020, it is subject to the Accelerated Investment
Incentive rules,...
Use the following information to answer the questions below. CATERPILLAR INC. Statement of Income for a...
Use the following information to answer the questions below.
CATERPILLAR INC. Statement of Income for a Recent Year
Total sales and revenues
......................................................................................
$55,184,000
Less: Cost of products sold
...................................................................................
$40,391,000
Gross profit
.......................................................................................,....................
$ 14,793,000
Less: Operating costs :
Selling, general, and administrative expenses
................................................ $ 5,697,000
Research and development expenses
............................................................
$2,135,000
Other operating expenses
...............................................................................
$1,633,000
Total operating costs
.............................................................................................
$ 9,465,000
Operating profit
.....................................................................................................
$ 5,328,000
Less: Other expenses
............................................................................................
245,000
Consolidated profit before taxes
.............................................................................
Use the following information to answer the questions below. CATERPILLAR INC. Statement of Income for a...
Use the following information to answer the questions below.
CATERPILLAR INC. Statement of Income for a Recent Year
Total sales and revenues
......................................................................................
$55,184,000
Less: Cost of products sold
...................................................................................
$40,391,000
Gross profit
.......................................................................................,....................
$ 14,793,000
Less: Operating costs :
Selling, general, and administrative expenses
................................................ $ 5,697,000
Research and development expenses
............................................................
$2,135,000
Other operating expenses
...............................................................................
$1,633,000
Total operating costs
.............................................................................................
$ 9,465,000
Operating profit
.....................................................................................................
$ 5,328,000
Less: Other expenses
............................................................................................
245,000
Consolidated profit before taxes
.............................................................................
Use the following information to answer the questions below:
Use the following information to answer the
questions below:
note: all sales are credit sales
Income Stmt info:
2016
2017
Sales
$ 975,000
$ 1,072,500
less Cost of Goods Sold:
325,000
346,125
Gross Profit
650,000
726,375
Operating Expenses
575,000
609,500
Earnings before Interest & Taxes
75,000
116,875
Interest exp
25,000
31,000
earnings before Taxes
50,000
85,875
Taxes
20,000
34,350
Net Income
$ 30,000
$
51,525
Balance Sheet info:
12/31/2016
12/31/2017
Cash
60,000
$ 63,600
Accounts Receivable
80,000
$ 84,000
Inventory...
Use the following information to answer questions [The following information applies to the questions displayed below.]...
Use the following information to answer questions [The following
information applies to the questions displayed below.] The
following information is available for Lock-Tite Company, which
produces special-order security products and uses a job order
costing system. April 30 May 31 Inventories Raw materials $ 48,000
$ 48,000 Work in process 9,900 19,700 Finished goods 67,000 33,700
Activities and information for May Raw materials purchases (paid
with cash) 194,000 Factory payroll (paid with cash) 150,000 Factory
overhead Indirect materials 14,000 Indirect...
Use the following information to answer questions [The following information applies to the questions displayed below.]...
Use the following information to answer questions
[The following information applies to the questions
displayed below.]
The following information is available for Lock-Tite Company, which
produces special-order security products and uses a job order
costing system.
April 30
May 31
Inventories
Raw materials
$
44,000
$
54,000
Work in process
9,500
18,800
Finished goods
59,000
34,000
Activities and information for May
Raw materials purchases (paid with cash)
185,000
Factory payroll (paid with cash)
250,000
Factory overhead
Indirect materials
10,000
Indirect...
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