Calculate the depreciation for the following scenarios. Bought a piece of equipment costing $30,000, with a salvage value of $10,000.

a) Figure the SL depreciation for year one and year two. Assuming a 10 year useful life.

b) Figure the units of production (activity) depreciation. Assuming that total units will be 100,000.

Year 1 – 20,000 units

   Year 2 - 30,000 units

c)Figure the double declining balance depreciation for year one and year two. Assuming a 4 year life.

d) Figure the SL depreciation; assuming a 10 year life; if the equipment was purchased on July 1^st.

e) Prepare the Journal Entry for a (SL Depreciation)

GUI company is considering investing in Project A or Project B. Project A generates the following cash flows: year “zero” = 313 dollars (outflow); year 1 = 297 dollars (inflow); year 2 = 337 dollars (inflow); year 3 = 330 dollars (inflow); year 4 = 149 dollars (inflow). Project B generates the following cash flows: year “zero” = 510 dollars (outflow); year 1 = 140 dollars (inflow); year 2 = 110 dollars (inflow); year 3 = 210 dollars (inflow); year 4 = 140 dollars (inflow). The MARR is 10%. Compute the External Rate of Return (ERR) of the BEST project. (if your answer is 10.25% then write 10.25 as your answer, not 0.1025)

JPMorgan Chase is considering the following mutually exclusive projects: A, B, C, D, and E with the following cash flows:

A: Initial Investment = -$15,000, Year 1 = $20,000, Year 2 = $25,000

B: Initial Investment = -$10,000, Year 1 = $14,000, Year 2 = $20,000

C: Initial Investment = -$12,000, Year 1 = $18,000, Year 2 = $15,000

D: Initial Investment = -$13,000, Year 1 = $22,000, Year 2 = $12,000

E: Initial Investment = -$20,000, Year 1 = $30,000, Year 2 = $15,000

JPMorgan Chase has a cost of capital of 14% p.a. and all these projects are of similar risk. JPMorgan Chase is not capital-rationed. Which project should JPMorgan Chase invest in if they are using the NPV criterion?

Epsilon company is considering investing in Project X or Project Y. Project X generates the following cash flows: year “zero” = 307 dollars (outflow); year 1 = 252 dollars (inflow); year 2 = 265 dollars (inflow); year 3 = 343 dollars (inflow); year 4 = 182 dollars (inflow). Project Y generates the following cash flows: year “zero” = 230 dollars (outflow); year 1 = 120 dollars (inflow); year 2 = 100 dollars (inflow); year 3 = 200 dollars (inflow); year 4 = 120 dollars (inflow). The MARR is 10%. Compute the External Rate of Return (ERR) of the BEST project

PLEASE INCLUDE FORMULAS AND DETAILED STEPS

Suppose a simple economy produces only two goods, pillows and rugs. In the first year, 50 pillows are produced, and sold at $5 each; 11 rugs are produced, and sold at $50 each. In the second year, 54 pillows are produced, and sold for $6 each; 12 rugs are produced, and sold at $52 each. In the third year, 60 pillows are produced and sell for $7.00 dollars each; 14 rugs are produced and sold for 64 dollars each. Calculate real GDP for each year and the growth rate of real GDP from year 1 to year 2 and from year 2 to year 3. Next, construct a constant weight price index for the three years. Use the first year as the base year for both calculations.

Epsilon company is considering investing in Project X or Project Y. Project X generates the following cash flows: year “zero” = 307 dollars (outflow); year 1 = 252 dollars (inflow); year 2 = 265 dollars (inflow); year 3 = 343 dollars (inflow); year 4 = 182 dollars (inflow). Project Y generates the following cash flows: year “zero” = 230 dollars (outflow); year 1 = 120 dollars (inflow); year 2 = 100 dollars (inflow); year 3 = 200 dollars (inflow); year 4 = 120 dollars (inflow). The MARR is 10%. Compute the External Rate of Return (ERR) of the BEST project

PLEASE INCLUDE FORMULAS AND DETAILED STEPS. NO EXCEL CALCULATIONS PLEASE

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.32 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1.735 million in annual sales, with costs of $650,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent.

a. What is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3?

b. If the required return is 12 percent, what is the project's NPV?

A construction company needs enough money to purchase a new tractor-trailer in 6 years at a cost of $450,000.

If the company sets aside $175,000 in year 2, $125,000 in year 3, and $75,000 in year 4, how much will the company have to set aside in year 5 to have the money needed in year 6?

Assume investments earn 8% per year compounded semi-annually.

What is the value of the individual cash flow at year = 1?

What semi-annual interest rate do you use to solve for the unknown cash flow in year 5?

What is the numerical value for the amount of funding the company have to set aside in year 5 to have the money needed in year 6?

6a- Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 15.2%. (Round to nearest penny)

Answer:

6b-  Your firm has limited capital to invest and is therefore interested in comparing projects based on the profitability index (PI), as well as other measures. What is the PI of the project with the estimated cash flows below? The required rate of return is 15.0%. Round to 3 decimals.

Year 0 cash flow = -710,000
Year 1 cash flow = -110,000
Year 2 cash flow = 410,000
Year 3 cash flow = 440,000
Year 4 cash flow = 430,000
Year 5 cash flow = 470,000

Answer:

6c- What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals.

Year 0 cash flow = -160,000
Year 1 cash flow = 45,000
Year 2 cash flow = 31,000
Year 3 cash flow = 34,000
Year 4 cash flow = 30,000
Year 5 cash flow = 33,000
Year 6 cash flow = 38,000

Answer: