Fibertech is deciding on opening a new plant. The new plant will be located on the existing land, which the company purchased 2 years ago for $1 million. The company has also spent $300,000 for market research.
If the plant is not opened the company will rent out the land for $200,000 per year. The expected sales of the new plant are $2.3 million per year for the next 5 years. The new plant's construction costs are $2 million (Year 0), the requirement for NWC is $200,000 in year 0, which will recover in year 5. The plant should be depreciated over 5 years using the straight-line method. Cost of sales is expected to be 40% os sales. Administrative expenses are $300,000 every year. Tax rate is 20%. What is the NPV of this project if the cost of capital is 15%?
Possible answers:
a. -$813,337
b. $527,525
c. $1,063,870
d. $428,090
e. -$437,896
In: Finance
5. A construction firm is evaluating the purchase of a new semi-trailer truck. The truck’s base price is $80,000, but the company will need to modify it at an additional cost of $20,000. The truck will be sold after three years for $30,000; and it falls into the MACRS five-year class. The purchase of this semi-trailer will have no effect on the firm’s revenues, but it is expected to save $45,000 per year in before-tax operating cost, mostly in leasing expenses. The company’s marginal tax rate (federal plus state) is 40%, and its MARR is 13%. Determine the following: a) Is this project acceptable, based on the most likely estimates given in the problem? Why yes or why not? b) What is the break-even interest rate for this project? c) Will the project be acceptable if the annual savings will be $40,000 instead of $45,000? Why yes or why not?
(IN excel with formulas please)
This problem will have to be solved by creating the Income and the Cash Flow Statements.
In: Accounting
Sheds Galore entered into a $70,000 contract to build a special shed for Tools and Stuff Inc. Sheds Galore has determined that the performance obligation would be settlled over time and uses the cost to cost input method to measure progress. Sheds Galore follows IFRS. Details of the construction of the shed are below:
2018 2019 2020
Total Costs Incurred 20000 45000 75000
Estimated Costs to Complete 40000 22000 0
Billings During the Year 15000 23000 32000
Collections During the Year 13000 24000 33000
Required
Prepare journal entries for 2018, 2019, and 2020 to record the transactions above and to record the revenue and profit or loss recognized for each year.
Show all your calculations and round all percentages to 1 decimal place (eg 20.1%) and all journal entries to the nearest dollar.
In: Accounting
The pavement in a new parking lot is expected to require no maintenance for the first two years of its life. At EOY3, the first resurfacing will have to be made costing $50,000. Every two years thereafter, the lot will need resurfacing. However, the cost for each resurfacing is expected to increase by 3% from the time before. The useful life of the parking lot is 26 years and no maintenance occurs in year 26.
a. What is the present worth of the resurfacing costs given a nominal discount rate of 5%.
b. Assume the parking lot costs $8,500,000 to construct. If the parking lot is expected to serve on average 400 vehicles per work day and the daily fee must cover both the amortized cost of the construction and the resurfacing costs, what should the daily per vehicle charge be? Assume that parking fees are charged only on week days (or 260 days per year).
In: Finance
Herb Corporation acquires a gold mine at a cost of $403,000. Development costs that were incurred total $106,000, including $11,300 of depreciation on movable equipment to construct mine shafts. Based on construction to date, the legal obligation to restore the property after the mine is exhausted has a present value of $74,100. Herb has publicly pledged an additional $21,000 (present value) for improved reclamation of the area surrounding the mine.
Prepare the journal entries to record the cost of the natural resource if Herb prepares financial statements in accordance with IFRS. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
|
Account Titles and Explanation |
Debit |
Credit |
_____________
______________
(To record purchase of a gold mine.)
_________________
__________________
(To record movable equipment entry.)
____________________
____________________
( To record property reclamation obligation.)
In: Accounting
BE SURE TO SHOW ALL 3 METHODS AND JUSTIFY THE ANSWER!
A contractor acquires truck-mounted concrete pumping equipment. Owing to the initial and operating costs, the contractor is in doubt as to the preferred method for charging depreciation. The contractor considers three methods: straight line, MACRS, and units of production. The facts are as follows: initial cost, $1,460,000; useful life 10 years, and a 20% salvage value. Production output starts at 200 yd^3/hr for a billing year of 2000 hrs. It is estimated that the pumping rate will decline 10yd^3/hr each year. For the data, plot the book value of the asset against time for the methods and select the best choice. Discuss the merits of these allocation schemes. (Hint: The best choice is the minimum book value as time proceeds, thus minimizing taxable income.)
This problem comes from Ostwald, Construction Cost Analysis and Estimating (2001)
In: Accounting
A school is overcrowded and there are three options. The do-nothing alternative corresponds to continuing to use modular classrooms. The school can be expanded, or a new school can be built to “split the load” between the schools. User benefits come from improvements in school performance for the expanded or new schools. If a new school is built, there are more benefits because more students will be able to walk to school, the average distance for those who ride the school buses will be shorter, and the schools will be smaller and more “student friendly.” The disbenefits for the expanded school are due to the impact of the construction process during the school year. The interest rate is 8%, and the life of each alternative is 20 years. Which alternative should be chosen? What is the incremental ratio for the preferred alternative?
(a) Use the benefit-cost ratio.
(b)Use the modified benefit-cost ratio.
(c)Use the public/government version of the B/C ratio.
In: Economics
Questions using the financial statements below:
What is the Net Income Margin? State your answer as a % and round to the nearest whole number
What is the current ratio? Remember that a ratio is stated in reference to 1 (not as a percentage), and you should carry ratio out to two decimal places
What is the exact amount that account receivables increased during the year?
What is the total Cost of Sales for the year?
What month does the fiscal year begin in?
What is the quick ratio? Remember that a ratio is stated in reference to 1 (not as a percentage), and you should carry ratio out to two decimal places.
What two revenue line items make up more than 80% of the company’s revenue for the year? Hint: Write answers exactly like they are on the financial statements, capitalization and spaces included. Place a comma and space ", " in between your two answers.
How much did Park Systems invest in radio facilities?
What is EBITDA (Net Income before Interest Expense, Taxes, Depreciation and Amortization are deducted)?
How much did the company pay down its Note Payable?
Balance Sheet
Years Ended December 31 (in thousands)
Assets
Current Assets
|
Cash |
$ 23,283 |
|
Accounts Receivable, net |
38,316 |
|
Prepaid Expenses |
3,655 |
|
SIM Inventory |
6,881 |
|
Total Current Assets |
72,135 |
|
Long-Term Assets |
|
|
Property & Equipment, net |
462,602 |
|
Total Assets |
$ 534,737 |
|
Liabilities and Equity |
|
|
Current Liabilities |
|
|
Accounts Payable |
$ 14,807 |
|
Accrued Payroll |
5,863 |
|
Accrued Expenses |
14,659 |
|
Note Payable, current |
26,972 |
|
Total Current Liabilities |
62,301 |
|
Long-Term Liabilities |
|
|
Note Payable, non-current |
296,849 |
|
Total Liabilities |
359,150 |
|
Stockholders Equity Common Stock |
134 |
|
Retained Earnings |
175,453 |
|
Total Stockholders Equity |
175,587 |
|
Total Liabilities & Stockholders Equity |
$ 534,737 |
Income Statement Years Ended December 31
(in thousands)
|
Revenues |
|
|
Data |
$ 201,663 |
|
SIM Subscription |
120,998 |
|
SMS (texting) |
40,333 |
|
SIM Purchase & Activation |
19,113 |
|
Other Revenue |
1,053 |
|
Total Revenues |
383,160 |
|
Cost of Sales |
|
|
GSM Roaming & Local Data |
110,915 |
|
Carrier SMS Fees |
24,200 |
|
SIM Manufacturing |
8,601 |
|
Direct Labor |
19,158 |
|
Total Cost of Sales |
162,873 |
|
Gross Profit |
220,287 |
|
Operating Expenses Core Telecom Network Ops |
66,086 |
|
Sales and Marketing |
32,575 |
|
Research and Development |
9,772 |
|
Radio Tower Facilities |
4,886 |
|
General & Administrative |
65,149 |
|
Total Operating Expenses |
178,468 |
|
Operating Income |
41,818 |
|
Investment Income |
1,685 |
|
Interest Expense |
(9,715) |
|
Foreign Exchange Gain (Loss) |
(1,836) |
|
Tax Provision Expense |
(3,904) |
|
Other Income (Expense) |
1,051 |
|
Net Income |
$ 29,100 |
Statement of Cash Flows Year Ended December 31 (in thousands)
Operating Activities
|
Consolidated net income |
$ 29,100 |
|
Adjustments Depreciation and amortization |
4,819 |
|
Changes in assets and liabilities: Accounts receivable |
(3,483) |
|
Inventory |
(9,891) |
|
Accounts payable |
888 |
|
Accrued expenses |
20,670 |
|
Net cash provided by operating activities |
42,103 |
Investing Activities
|
Investment in radio facilities |
(17,102) |
|
Capital Equipment expenditure |
(5,783) |
|
Net cash (used in) investing activities |
(22,884) |
|
Financing Activities |
|
|
Payments on note payable |
(6,476) |
|
Net cash provided by financing activities |
(6,476) |
|
Net increase (decrease) in cash and equivalents |
12,743 |
|
Cash and equivalents, beginning of year |
10,540 |
|
Cash and equivalents, end of year |
$ 23,283 |
In: Accounting
Pinkerton Steelworks manufactures high quality bearings for
large construction equipment. An
analysis reveals that sales for one of the company’s main products,
the super bearing, is
declining due to aggressive pricing by competitors. Pinkerton's
product sells for $525 whereas
the competition's comparable part is selling for close to $425.
Consultants have determined that a
price drop to $400 is necessary to regain market share and annual
sales of 1,000 units.
Cost data based on sales of 1,000 super bearings:
| Budget quantity | Actual quantity | Actual cost | |
| Direct materials | 10,000 lbs | 11,000 lbs | $55,800 |
| Direct labor | 4,600 hrs | 5,200 hrs | 155,000 |
| Inspections | 2,500 hrs | 3,000 hrs | 57,000 |
| Materials handling | 100 moves | 120 moves | 35,000 |
| Mechanical assembly | 3,000 hrs | 4,000 hrs | 140,000 |
1. Calculate the current cost and profit per unit.
2. How much of the current cost per unit is attributable to
non-value added activities?
3. Calculate the new target cost per unit for a sales price of $400
if the profit per unit is
maintained.
4. What strategy do you suggest for Pinkerton to attain the target
cost per unit?
In: Accounting
A piece of equipment having a negligible salvage and scrap value if estimated to have a MACRS and straight line recovery period of 5 years. The original cost of ther equipment was $500,000. Determin the depreciation charge of the euipment for the second yeqr if straight line depreciation is used and the percentage of the original investment paid off in the first 2 years.
In: Other