Projects A and B, both of equal risk, are mutually exclusive alternatives for expanding Corporation’s capacity. The firm’s cost of capital is 13%. The cash flows for each project are shown in the following table.

                                    Project A                                              Project B

                        Year 0:             ($80,000)                      Year 0:             ($80,000)

                        Year 1:             $15,000                        Year 1:             $15,000

                        Year 2:             $20,000                        Year 2:             $15,000

                        Year 3:             $25,000                        Year 3:             $15,000

                        Year 4:             $30,000                        Year 4:             $35,000

                        Year 5:             $30,000                        Year 5:             $25,000

            A.        What is each project’s payback period?

            B.         What is each project’s net present value?

            C.         What is each project’s internal rate of return?

            D.        Which project should Corporation accept and why? Explain.

1.

a. Calculate the IRR for the following project if its cost was $5,000 and the annual expenditures and costs were:

b. Assume a firm's WACC is 10 percent. Calculate the NPV for the following project if its cost was $5,000 and the annual expenditures and costs were:

c. Assume you think the expected rate of return is too high. What should you do?

Group of answer choices

Do nothing.

Not enough information to say.

Sell the stock if you own it.

Buy the stock.

A high-speed multiple-bit drill press costing $1,080,000 has an estimated salvage value of $90,000 and a life of ten years. What is the annual depreciation for each of the first two full years under the following depreciation methods?

Units of production (activity) method (lifetime output is estimated at 110,000 units; the press produced 12,000 units in year one and 18,000 in year two):

Double-declining-balance method:

Year one, $______________.

Year two, $______________.

Units of production (activity) method (lifetime output is estimated at 110,000 units; the press produced 12,000 units in year one and 18,000 in year two):

Year one, $______________.

Year two, $______________.

Sum-of-the-years'-digits method:

Year one, $______________.

Year two, $______________.

Straight-line depreciation method:

Year one, $______________.

Year two, $______________.

RTE Telecom, Inc. is a U.S. firm that wants to expand its business internationally. It is considering mutually exclusive potential projects in both Germany and Mexico, and the German project is expected to take six years, whereas the Mexican project is expected to take only three years. However, the three-year project is repeatable. If the cost of capital for each project is 10%, what is the difference in NPVs between the German and Mexican projects?

a) $169,753

b) $175,036

c) $185,953

d) $199,005

c) $210,398

The cost of a typical basket of consumer goods is shown below for six ( 6 ) years. Year Cost of Basket Year Cost of Basket 1 $ 175 4 $ 211 2 $ 183 5 $ 225 3 $ 193 6 $ 236 Required: Calculate the following: 1. The CPI for each year, and the rate of inflation for years 2, 3, 4, 5 and 6. In doing this students with the last name starting with, A to C will use Year 6 as the base year, D to G will use Year 5, H to L will use Year 4, M will use Year 3, N to R will use Year 2, and S to Z will use Year 1. Both the CPI values and inflation rates must be stated to one decimal place. Please use year 6 as base year. thanks.

7.        Calculate the annual purchasing power over the term of a 5-year loan of provided to Shane Kavanagh, a 37-year old bricklayer. The interest-only loan of $80,000 requiring annual repayments in arrears was made by the Beneficial Finance Agency on a variable interest rate basis. The variable interest rate over the loan term was as follows:

            Details             Year 1              Year 2              Year 3              Year 4              Year 5

            Interest rate       7%                    8%                 8.5%               9.2%                  9%

            Other details over this period are shown below:

            Details             Year 1              Year 2              Year 3              Year 4              Year 5

            Inflows:

            Salary              $65,000           $75,000           $82,000           $88,000           $90,000

            Investments     $5,000              $10,000           $12,000           $11,000           $78,000

            Outflows:

            Taxation          $ 8,000           $10,000           $14,000           $16,000           $15,000

The Mardova Clinic purchased a new surgical laser for $72,000 on January 1, 2020. The estimated salvage value is $8,000. The laser has a useful life of four years and the clinic expects to use it 8,000 hours. It was used 2,600 hours in year 1; 2,400 hours in year 2; 2,200 hours in year 3; and 2,000 hours in year 4.

Compute the annual depreciation expense, accumulated depreciation, and book value for each of the four years under each of the following four methods and answer the questions in the response template below:

A) Straight-line  

B) Units of Activity  

C) 150% Declining Balance

D) Sum of the Years Digits

A) Straight-line  

1) Year 1 - Depreciation expense $

2) Year 2 - Accumulated depreciation $

3) Year 3 - Book value $

4) Year 4 - Depreciation expense $

B) Units of Activity  

5) Year 1 - Depreciation expense $

6) Year 2 - Accumulated depreciation $

7) Year 3 - Book value $

8) Year 4 - Depreciation expense $

C) 150% Declining Balance

9) Year 1 - Depreciation expense $

10) Year 2 - Accumulated depreciation $

11) Year 3 - Book value $

12) Year 4 - Depreciation expense $

D) Sum of the Years Digits

13) Year 1 - Depreciation expense $

14) Year 2 - Accumulated depreciation $

15) Year 3 - Book value $

16) Year 4 - Depreciation expense $

The Mardova Clinic purchased a new surgical laser for $72,000 on January 1, 2020. The estimated salvage value is $8,000. The laser has a useful life of four years and the clinic expects to use it 8,000 hours. It was used 2,600 hours in year 1; 2,400 hours in year 2; 2,200 hours in year 3; and 2,000 hours in year 4.

Compute the annual depreciation expense, accumulated depreciation, and book value for each of the four years under each of the following four methods and answer the questions in the response template below:

A) Straight-line  

B) Units of Activity  

C) 150% Declining Balance

D) Sum of the Years Digits

A) Straight-line  

1) Year 1 - Depreciation expense $

2) Year 2 - Accumulated depreciation $

3) Year 3 - Book value $

4) Year 4 - Depreciation expense $

B) Units of Activity  

5) Year 1 - Depreciation expense $

6) Year 2 - Accumulated depreciation $

7) Year 3 - Book value $

8) Year 4 - Depreciation expense $

C) 150% Declining Balance

9) Year 1 - Depreciation expense $

10) Year 2 - Accumulated depreciation $

11) Year 3 - Book value $

12) Year 4 - Depreciation expense $

D) Sum of the Years Digits

13) Year 1 - Depreciation expense $

14) Year 2 - Accumulated depreciation $

15) Year 3 - Book value $

16) Year 4 - Depreciation expense $

O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

During its first year of operations, O’Brien produced 97,000 units and sold 80,000 units. During its second year of operations, it produced 84,000 units and sold 96,000 units. In its third year, O’Brien produced 82,000 units and sold 77,000 units. The selling price of the company’s product is $75 per unit.

2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3

b. Prepare an income statement for Year 1, Year 2, and Year 3.

c. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

d Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)

e Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)

Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:

During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $54 per unit.

Required:

1. Assume the company uses variable costing:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses absorption costing:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.

Require 1a.

Assume the company uses variable costing. Compute the unit product cost for year 1 and year 2.

Required 1b.

Assume the company uses variable costing. Prepare an income statement for Year 1 and Year 2.

Required 2a.

Assume the company uses absorption costing. Compute the unit product cost for Year 1 and Year 2. (Round your answer to 2 decimal places.)

Required 2b.

Assume the company uses absorption costing. Prepare an income statement for Year 1 and Year 2. (Round your intermediate calculations to 2 decimal places.)

Require 3.

Reconcile the difference between variable costing and absorption costing net operating income in Year 1. (Enter any losses or deductions as a negative value.)