Pine Village City council proposes to construct new recreation fields. Construction will cost $350,000 and Annual expenses are $80,000. The city council estimates that the valve of added youth leagues is about $125,000 annually. In year 6 another $90,000 will be needed to refurbish the fields. The city council agrees to transform the ownership of the field to a private company for $150,000 at the end of year 10.

a. Draw the cash flow diagram.

b. If the MARR for the Pine Village city is 5%, calculate the NPV of the new recreation field project.

1. Brower, Inc. just constructed a manufacturing plant in Europe. The construction cost 10 million Euros. Brower intends to leave the plant open for three years. During the three years of operation, Euro cash flows are expected to be 1 million euros, 2 million euros, and 3 million euros, respectively. Operating cash flows will begin one year from today and are remitted back to the parent at the end of each year. At the end of the third year, Brower expects to sell the plant for 8 million euros. Brower has a required rate of return of 10 percent. The current exchange rate is $1.18/euro and the Euro is expected to depreciate to $1.15/euro in year 1, $1.14/euro in year 2 and $1.13/euro in year 3.

1. Determine the NPV for this project. Should Brower build the plant?

2. How would your answer change if the value of the euro was expected to appreciate from its current value of $1.18/euro to $1.21/euro in year 1, $1.23/euro in year 2 and $1.25/euro in year 3?

Zolar, Inc, just constructed a manufacturing plant in Canada. The construction cost 9 billion Canadian dollar. Zolar intends to leave the plant open for 3 years. During the 3 years of operation, dollar cash flows are expected to be 3 billion dollar, 3 billion dollar and 2 billion dollar respectively. Operating cash flows will begin one year from today and are remitted back to the parent at the end of each year. At the end of the third year, Zolar expects to sell the plant for 5 billion dollar. Zolar has a required rate of return of 17 percent. It currently takes 1.28 to buy one U.S. dollar and the Canadian dollar is expected to depreciate by 5 percent per year.

(i) Determine the NPV for this project. Should Zolar build the plant?

(ii) How would your answer change if the value of the Canadian dollar was expected to remain unchanged from its current value of 1.28 Canadian dollar per U.S. dollar over the course of the 3 years? Should Brower construct the plant then?

(Please provide Explanation)

Factory Overhead Cost Variance Report

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 8,400 hours.

During May, the department operated at 8,860 hours, and the factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.

Required:

Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 8,860 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If an amount box does not require an entry, leave it blank.

ACCT 101B - CH 23 EXAMPLE 4

1. Prepare a job cost sheet for a single family home under construction. List about five items that can be classified as direct materials and direct labor. Make a list of overhead costs of five items. Explain how you think overhead should be applied.

2. Contact a home builder and compare your job cost sheet to this builder's job cost sheet. If possible, speak to the company's accountant. Write your findings in a short report (about 1 page). If you do not like home builders, you can choose an architecture firm, consulting company, auditing firm, manufacturing company or any other company that uses job order costing.

I am thinking about going into the hotel business through acquiring 12 hotels spread throughout the Rocky Mountain region. I have projected out the costs of hiring managers to run the hotels, as well as the other many costs of operating them. Based on this, I have a good handle on the cash flows the project will generate, and I now need to estimate the cost of equity I will use to discount these cash flows.

Unfortunately, I am out of time, and so I need you, my brilliant financial protege, to give me an estimate of a reasonable cost of equity for this project. Obviously, I don't have the 10 million needed to acquire the hotels myself and will need to attract additional equity financing from outside investors. So when I meet with these investors, I need a logical estimate and explanation for what the cost of equity is that they should be earning. So don't just give me a number, you have to tell me why you pick what you do.

Obviously, they could invest in many other hotel chains and management companies, many of which are publicly traded. So your best approach is to look at the cost of equity for these pure-plays (the ticker for Hilton is HLT, but I would rely on estimates from more than one company so look up their competitors) and make adjustments based on our situation. For instance, consider the following differences:

Are your pure-play firms more or less risky based on geographic dispersion relative to us?

Are your pure-play firms more or less risky based on easier access to additional capital?

Am I or these pure-plays more likely to achieve operating efficiency (higher profit margins) over the next four or five years?

There are certainly other considerations you might come up with that I am missing right now, so feel free to include them as well. But make adjustments to your estimates to fit my situation. Then write up your conclusions in a professional sounding report that is no longer than one page. Put any additional tables in an appendix.

(The 12 hotels are not relevant. They only give you the industry that you are researching. If you want to value a company, you have to figure out what companies in that same industry are selling for, or what kind of discount rate investors expect for firms in that industry. So you have to look at other firms in the same industry. So you will look up hotel firms, and calculate their cost of equity. And then you will make adjustments to their costs based on the subject firm with 12 hotels. So think about this logically. Would you rather invest in Hilton, with thousands of hotels, or this company with 12? Which is less risky? Which has more growth potential? These are the kinds of issues you would think about when estimating the cost of equity using the pure play approach. But no, this is not based on an actual firm, so there won't be stuff on the internet about it. )

Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,600,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows:

Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 11% return on invested assets.

Labels

Cash flows from operating activities

Costs

Amount Descriptions

Cash payments for merchandise

Cash received from customers

Fixed manufacturing costs

Income (loss)

Revenues

Variable manufacturing costs

1. Determine the amount of desired profit from the production and sale of flat panel displays.

2. Assuming that the product cost method is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of flat panel displays. Round your markup percentage and selling price to two decimal places.

3. (Appendix) Assuming that the total cost method is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of flat panel displays. Round your markup percentage and selling price to two decimal places.

4. (Appendix) Assuming that the variable cost method is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of flat panel displays. Round your markup percentage and selling price to two decimal places.

5. Comment on any additional considerations that could influence establishing the selling price for flat panel displays.

The cost-plus approach price computed above should be viewed as a general guideline for establishing long-run normal prices; however, other considerations, such as   , could lead management to establish a different short-run price.

6a. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required.

6b. Based on the differential analysis in part (a), should the proposal be accepted?

The company is indifferent since the result is the same regardless of which alternative is chosen.

Yes

No

Problem 10-3

Concord Company was incorporated on January 2, 2018, but was unable to begin manufacturing activities until July 1, 2018, because new factory facilities were not completed until that date.

The Land and Buildings account reported the following items during 2018.

The following additional information is to be considered.

1.Stargazer Company was incorporated on January 1, 2015 but was unable to begin manufacturing activities until July 1, 2015, because new factory facilities were not completed until that date. The Land and Building account reported the following items during 2015:

January 31                                                        Land and buildings                          $160,000

February 28                                                     Cost of removal of building                 9,800

May 1                                                              Partial payment of new construction     60,000

May 1                                                              Legal fees paid                                     3,770

June 1                                                              Second payment on new construction 40,000

June 1                                                              Insurance premium                              2,280

June 1                                                              Special tax assessment                         4,000

June 30                                                            General expenses                                 36,300

July 1                                                               Final payment on new construction     30,000

December 31                                                   Asset write up                                      53,800

                                                                                                                                    399,950

December 31                                                   Depreciation – 2015 at 1%                  (4,000)

December 31, 2015                                         Account balance                                  395,950

The following additional information is to be considered:

1. To acquire land and building, the company paid $80,000 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair value of the stock is $117 per share.

2. Cost of removal of old buildings amounted to $9,800, and the demolition company retained all materials of the building.

3. Legal fees covered the following:

Cost of organization $610

Examination of title covering purchase of land1,300

Legal work in connection with construction contract1,860

                                                                                    3,770

4. Insurance premium covered the building for a 2 year term beginning May 1, 2015.

5. The special tax assessment covered street improvements that are permanent in nature.

6. General expenses covered the following for the period from Jan 1 to June 30, 2015.

President’s salary$32,100

Plant superintendent’s salary – supervision of new building4,200

                                                                                                36,300

7. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building $53,800, believing that such an increase was justified to reflect the current market at the time the building was completed. Retained earnings was credited for this amount.

8. Estimated life of building – 50 years. Depreciation for 2015 – 1% of asset value (1% of $400,000 or $4,000)

Provide entries to reflect correct land, buildings and depreciation accounts at December 31, 2015. I would recommend you show detailed calculations to receive partial credit.

Can you show your calculations please! and explain too

Ayayai Company was incorporated on January 2, 2018, but was unable to begin manufacturing activities until July 1, 2018, because new factory facilities were not completed until that date. The Land and Buildings account reported the following items during 2018. January 31 Land and building $164,600 February 28 Cost of removal of building 9,909 May 1 Partial payment of new construction 62,340 May 1 Legal fees paid 4,460 June 1 Second payment on new construction 44,000 June 1 Insurance premium 2,280 June 1 Special tax assessment 3,780 June 30 General expenses 35,298 July 1 Final payment on new construction 30,160 December 31 Asset write-up 48,889 405,716 December 31 Depreciation-2018 at 1% (4,231 ) December 31, 2018 Account balance $401,485 The following additional information is to be considered. 1. To acquire land and building, the company paid $84,600 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair value of the stock is $127 per share. 2. Cost of removal of old buildings amounted to $9,909, and the demolition company retained all materials of the building. 3. Legal fees covered the following. Cost of organization $620 Examination of title covering purchase of land 1,690 Legal work in connection with construction contract 2,150 $4,460 4. Insurance premium covered the building for a 2-year term beginning May 1, 2018. 5. The special tax assessment covered street improvements that are permanent in nature. 6. General expenses covered the following for the period from January 2, 2018, to June 30, 2018. President’s salary $31,365 Plant superintendent’s salary-supervision of new building 3,933 $35,298 7. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building $48,889, believing that such an increase was justified to reflect the current market at the time the building was completed. Retained earnings was credited for this amount. 8. Estimated life of building-50 years. Depreciation for 2018-1% of asset value (1% of $423,100, or $4,231). Prepare entries to reflect correct land, buildings, and depreciation accounts at December 31, 2018. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and