Irwin, Inc., constructed a machine at a total cost of $45 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $1 million. At the beginning of 2018, Irwin decided to change to the straight-line method.

Ignoring income taxes, prepare the journal entry relating to the machine for 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
  

Answer:

Suppose the total cost of a representative perfectly competitive apple producer is given as

tc = 12 + 6q + q^2$. All apple producers in the market are assumed to be identical. Suppose

further that the demand for apples is estimated as qd= 18,000 − 500p and market supply is

qs = 2,000 + 500p

a. (2 points) Find the equilibrium market price and total supply of apples in the market.

b. (4 points) What is the profit maximizing quantity of apples each company would

produce? Find the total revenue, total cost and profits associated with the profit

maximizing quantity.

c. (4 points) Comment on whether this is an equilibrium in the short-run or in the long-run.

Which assumption of perfectly competitive markets do you base your response on?

d. (3 points) What is the short-run supply function of this apple producer?

e. (2 points) What is the number of companies in the market in the short-run?

f. (5 points) Using the assumptions of the perfectly competitive model, comment on what

will happen in the market in the long-run. What will be the new equilibrium price?

What will be the number of companies? Assume input prices will remain the same, no

matter what, regardless of the number of apple producers in the market.

In the space provided below write a C program that computes the total cost of items you want to order online. It does so by first asking how many items are in your shopping cart and then based on that number, it repeatedly asks you to enter the cost of each item. It then adds a 5% delivery charge for standard delivery if the total is below $1,000, and an additional 10% charge if you want an expedited next day delivery.

In a slow year, Deutsche Burgers will produce 2.400 million hamburgers at a total cost of $3.900 million. In a good year, it can produce 4.200 million hamburgers at a total cost of $4.800 million. a. What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.) b. What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What is the average cost per burger when the firm produces 1 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. What is the average cost per burger when the firm produces 2 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) e. Why is the average cost lower when more burgers are produced? The fixed costs are spread across more burgers. Variable costs are lower per burger. Fixed costs are constant per burger.

Write a javascript program that computes the total cost for a five year car lease. The program starts with a monthly leasing amount and a yearly increase in percent. The program then outputs the total amount paid for each year and the total overall cost of the lease.

At the starting point of 20 time periods duration of a project, the total direct cost is 6,000 and total indirect cost is 2,000 with a total of 8,000. After crashing a critical activity that total drops to 7,940 at 19 time periods with total direct cost of $6040. The total cost drops again to 7,890 at 18 with total direct cost $6090, stays 7,890 at 17 but total direct cost becomes $6190, rises to 8,190 at 16 with total direct cost $6590. The total cost finally rises again to 8,490 at 15 with total direct cost at $6990. The project duration cannot be reduced further.

a) Show the project cost-duration graph.

b) In which time period (s) is the total cost minimum or optimal.

c) How can a cost-duration graph be used by the project manager?

Harvey’s REIT is a company that invests in income generating land and buildings. Since Harvey’s is organized as a REIT it must pay out most if not all of its income to shareholders as a dividend. Since the firm is a “pass through” vehicle (passes income straight threw to investors), the REIT pays no taxes (its investors get taxed at the personal level with all income treated as ordinary income). With little retained earnings, new real estate acquisitions are debt or equity financed.

Harvey has two categories of investment. One category is hotels and the second is land for special events parking. The land business is very interesting because you can simply buy the land and there is little or no working capital or capital expenditure needs since the land is often just fields near ballparks, state fairs, concert facilities, etc…

For most of Harvey’s businesses, the cash flow grows at roughly the inflation rate. Hotel fares and parking rates trend up with inflation. Acquisitions rarely add much value, since they are bought in competitive real estate markets. What you pay is pretty close to the discounted cash flow value of what you buy. No acquisitions are currently on the radar and most believe that there should be little “value from future acquisitions” in Harvey’s REIT share prices.

Harvey has entertained breaking up the two units perhaps by divesting one and keeping the other. He wonders what each unit is worth. Here are the cash flows of each business

Hotels: FCF = 90m upcoming year

Parking land FCF = 30m upcoming year

Both business are expected to grow their FCF at 2.4% in perpetuity (due to inflation)

Recall from your prior classes a growing perpetuity is worth:  

Value now = FCF(upcoming year) / (discount rate on FCF – growth rate in perpetuity)

For the most part, given the absence of taxes, it is believed that the firm’s situation approximates perfect market conditions (assuming debt is not 75% plus of total financing which could raise bankruptcy concerns).

Similar (non-taxed) REITS have the following data:

Pure plays (MV stands for market Value and all figures in millions):

The land parking business is unique in the world of publicly traded equities. There are no pure plays out there. All the above firms with D/E below 1.1 are able to borrow at approximately 4.5%. The market risk premium is 5% and the risk free rate is 4.5%. The same is true for Harvey.

Harvey currently has market value of debt = 1000m

Harvey has a market value of equity = 1500m

Harvey has an equity beta of 0.9.

Harvey does not “allocate debt” between divisions. He views the debt ratio of each to be the same.

Assume that Harvey views the market valuation of his firm as likely accurate – he believes that markets are “efficient.” He also views the valuation of competitors as reasonably accurate. He thinks the listed hotel competitors have properties with fairly similar risk, but realizes there may be slight errors in beta estimates (up or down) and averages of beta will have less errors.

How can Harvey figure out the value of his hotel business (not equity or debt pieces, the whole value) and what is the estimate for it? Show the steps for doing so for partial credit

What is the value of the Land business, its’ WACC, and its’ unlevered beta?

Assume that no divestiture takes place. If the Land business got an unexpected opportunity to acquire a piece of land that would generate FCF = 2m growing at 2.4% in perpetuity, and it had an asking price of 48m, should it do the deal? Why or why not?

Some at the firm say that 2/48 = 4.1667%. They note that the accounting return is not even sufficient to cover the cost of borrowing (if the project is financed with all debt) and therefore the project should not be taken. Does this logic make sense? Explain why or why not? (An explanation of what is right or wrong with argument would be useful.

1. When the short-run marginal cost curve is upward-sloping,

The average total cost curve is upward-sloping

There are diseconomies of scale.

The average total cost curve is above the marginal cost curve.

Diminishing returns occurs with greater output.

2. Marginal revenue is the change in

Group of answer choices

Average revenue when output is changed.

Average revenue when price is changed.

Total revenue when output is changed.

Total revenue when price is changed.

3.The shutdown point occurs where price equals the minimum of

AFC.

MR.

AVC.

ATC.

4. Economic profit is the difference between

Accounting profit and explicit costs.

Accounting profits and external costs.

Total costs and total economic costs.

Total revenues and total economic costs.

5. If the equilibrium price in a perfectly competitive market for walnuts is $4.99 per pound, then an individual firm in this market can

Not sell additional walnuts unless the firm lowers its price.

Sell more only by increasing its advertising budget.

Sell an additional pound of walnuts at $4.99.

Not sell additional walnuts at any price because the market is at equilibrium.

6. Profit per unit is equal to

TR - ATC.

P - MR.

TR - TC.

P - ATC.