A firm purchased some office equipment for a total cost of $300000. The equipment generated net income of $100000 per year. The firm’s marginal tax rate is 20%. The equipment was sold at the end of the 4th year for a total of $75000. Assume that MARR is 12%/year. Calculate the net present worth (NPW) of this investment for problems 5-8.

7 (15 points). If the firm used the DDB depreciation, NPW =

8 (15 points). If the firm used the MACRS depreciation, NPW =

Max Ltd acquires an item of machinery on 1 July 2016 for a total acquisition cost of $61,000. The life of the asset is assessed as being six (6) years, after which time Max Ltd expects to be able to dispose of the asset for $6,000. It is expected that the benefits will be generated in a pattern that is best reflected by the sum—of—digits depreciation approach. On 1 July 2019, owing to unforeseen circumstances, the machinery is exchanged for a motor vehicle. Note the motor vehicle is two years old, originally cost $17,000 and has a fair value of $11,000.

Required: Provide the necessary journal entries for the disposal of the machinery and the acquisition of the motor vehicle on 1 July 2019.

1. Consider the purchase of a new farm truck (automobile). The specific information is:

Total Purchase cost = $150,000.00              Purchase date = Jan 1, 2020

Useful life = 6 years                                      Salvage value = $50,000.00

Note: each highlighted box is worth 1 point

Complete each depreciation table.

ECONOMIC DEPRECIATION:

1. Fill in the table using the straight-line depreciation method for economic depreciation. (5 points)

1. Fill in the table using the straight-line method for economic depreciation as if the purchase date was October 1, 2020 (partial year method) (7 points)

1. Consider the purchase of a new farm truck (automobile). The specific information is:

Total Purchase cost = $150,000.00              Purchase date = Jan 1, 2020

Useful life = 6 years                                      Salvage value = $50,000.00

Note: each highlighted box is worth 1 point

Complete each depreciation table.

ECONOMIC DEPRECIATION:

1. Fill in the table using the straight-line depreciation method for economic depreciation. (5 points)

The Reburn Corporation purchased an asset several years ago for a total installed cost of $185,000. During the time since then, for corporate income tax purposes the firm has claimed $100,000 of depreciation expense on that asset. The corporate income tax rate is a flat rate of 21%.

11.     If the sales price is $95,000, the after-tax proceeds of the sale will be:

            A.        $ 97,100

            B.        $ 96,050

            C.        $ 93,950

            D.        $ 92,900

12.     If the sales price is $70,000, the after-tax proceeds of the sale will be:

            A.        $ 76,300

            B.        $ 73,150

            C.        $ 66,850

            D.        $ 63,700

Consider a monopoly that faces a demand curve and short run total cost function of:

P= 270-2Q

TC= 4700+1/4Q²

A. Find the profit-maximizing quantity for this monopolist.

B. How much profit will the firm make?

C. Represent this situation graphically, pointing out all the features, including cost curves.

D. How much is the deadweight loss caused by the monopolist?

1. Designer Furniture began June with merchandise inventory of 45 sofas that cost a total of $31,500. During the month, Designer Furniture purchased and sold merchandise on account as follows:

Using the LIFO inventory costing method, and determine the company's cost of goods sold, ending merchandise inventory, and gross profit

Consider the following sample of production volumes and total cost data for a manufacturing operation.

This data was used to develop an estimated regression equation, ŷ = 1,305.33 + 7.44x, relating production volume and cost for a particular manufacturing operation. Use α = 0.05 to test whether the production volume is significantly related to the total cost. (Use the F test.)

State the null and alternative hypotheses.

Set up the ANOVA table. (Round your p-value to three decimal places and all other values to two decimal places.)

Find the value of the test statistic. (Round your answer to two decimal places.)

Find the p-value. (Round your answer to three decimal places.)

What is your conclusion?

a.Reject H₀. We conclude that the relationship between production volume and total cost is significant.

b.Do not reject H₀. We conclude that the relationship between production volume and total cost is significant.   

c.Reject H₀. We cannot conclude that the relationship between production volume and total cost is significant.

d.Do not reject H₀. We cannot conclude that the relationship between production volume and total cost is significant.

3.

DETAILS

Hanover Binding plans to produce 40,000 books next year at a total cost of $1,640,000 with a selling price per book of $66.00. The fixed costs total $280,000. Management is considering lowering the price to $60.00 per book, and feels that this action will cause sales to climb to 50,000 books. What is the amount of incremental profit if 50,000 books are sold?