In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2023. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

Consider three possible taxes that would raise the same revenue: A) a property tax on the value of real estate, B) a per-unit tax on soft-drinks, and C) a sales tax on staple foods.

a. Rank the three taxes based on their economic efficiency in raising revenue. Explain. (You may refer to them by letter)

b. Explain why a policymaker might choose a different rank ordering of the three taxes when choosing which to implement.

4) Your company is considering a project that will generate sales revenue of $90 million in Year 1. Revenue is expected to be flat for subsequent years. The project requires working capital equal to 16% of sales revenue, and has total operating costs excluding depreciation equal to 50% of sales. The equipment has a 3 year MACRS life and can be purchased and installed for $100 million. The project will end in three years. At that time, the equipment can be sold for $4.2 million. Your company’s tax rate is 25%.

a) Find the initial cash flow (Yr. 0).

b) Find the operating cash flows (Yrs. 1-3).

MACRS Depreciation Tables

5)   Using the information from Problem 4:

         a)   Find the after-tax cash flow from the sale of the equipment.

         b)   Find the total flow that occurs in Yr. 3.

.   From the hypothetical market demand schedule in the table, determine the total revenue. On two graphs, plot the demand schedule and total revenue. Find the elasticity of market demand between the points (A and B, B and C, etc) and indicate whether the price elasticity of demand is elastic, inelastic, or unitary elastic. Please show all work to receive full marks.
Alternative or point   Price
(in $)   Quantity demanded
(million units/year)
A   $3.50   1
B   3.00   2
C   2.50   3
E   2.00   4
F   1.50   5
G   1.00   6
H   0.50   7

b.   Assuming the current price is $2.50, if a firm wishes to increase total revenue, should they increase or decrease price?

Explain and show why marginal revenue of a monopoly is different than in a competitive market? Show how that leads a monopoly to produce less of the good than a competitive and sells that good at a higher price?

3. What are Mayo Clinic current revenue sources by payor? Is it favorable? How is it changing?​

What grouping of revenue do you believe the not for profit organization that you work for uses (service line, revenue source, etc.)? Why do you think they chose this grouping? Is this a good choice or do you think there is a better option?

2

a.) Draw the demand, marginal revenue and marginal cost curve for a monopolist. Show the equilibrium price and quantity supplied and total profit. Show the equilibrium price and quantity supplied and total profit.

b.) Suppose new policy suggest the government can imposed a tax on monopolists equal to 25 percent of their economic profits, how this affect the output level of the firm? How about the price? Explain.

In each of the following situations, state at which date(s), if any, revenue will be recognised. Explain your reasoning.                                                 

(a) A contract for the rendering of services is entered into on 1 May 2023. The services are delivered on 15 May 2023. The buyer pays for the services on 30 May 2023. The services are covered by a special warranty which expires on 30 June 2023. The special warranty allows for the goods to be returned and a refund received.

(b) A contract for the sale of goods is entered into on 1 May 2023. The goods are delivered to the buyer for one month’s evaluation on 15 May 2023. If the buyer is happy with the goods the contract provides for further sales each month. The buyer pays for the evaluation goods on 3 May 2023. The evaluation goods are returnable under normal warranty conditions until 30 June 2023.           

(c) A contract for the rendering of services is entered into on 1 May 2023. The services are delivered continuously over a 1-year period commencing on 15 May 2023. The buyer pays for the services on a monthly basis, commencing on 15 May 2023. The buyer may revoke the agreement at any time.

Determine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by selecting Overstated (too much), Understated (too little),or Not Affected.