A company’s year-end balance in accounts receivable is $2,000,000. The allowance for uncollectible accounts had a beginning-of-year credit balance of $30,000. An aging of accounts receivable at the end of the year indicates a required allowance of $38,000. If bad debt expense for the year was $40,000 and if credit sales for the year were $8,200,000 and $7,950,000 was collected from credit customers, what was the beginning-of-year balance in accounts receivable?

You have $1,000 to invest over an investment horizon of three years. The bond market offers various options. You can buy (i) a sequence of three one-year bonds; or (ii) a three-year bond; The current yield curve tells you that the one-year, two-year, and three-year yields to maturity are 3 percent, 4 percent, and 4.4 percent, respectively. You expect that one-year interest rates will be 4 percent next year and 5 percent the year after that. Assuming annual compounding, compute the return on each of the two investments.

Expected return for (i)=

Expected return for (ii)=

A project requires an initial investment of $200,000 in a machine and is expected to produce cost savings of $120,000 each year for two years. The tax rate is 30%. The machine will be depreciated using the MACRS 3-year schedule (first year 33%, second year 45%, third year 15% and fourth year 7%). The machine can be sold for $50,000 after two years. The project’s required return is 11%.

(1)   What is the initial cash flow at t=0?

(2)   What are the operating cash flows in year 1 and 2?

(3)   What is the year 2 terminal cash flow?

(4)   What is the NPV of the project?

Estimated cash flows appear below for an investment project. The project's required rate of return (RRR) is 11.40%. What is the discounted payback period for the project in years? Cash flows after Year 0 are assumed to be end-of-year cash flows. Year 0 cash flow = -67,000 Year 1 cash flow = 17,000 Year 2 cash flow = 20,000 Year 3 cash flow = 27,000 Year 4 cash flow = 30,000 Year 5 cash flow = 24,000 Select one: a. 3.37 b. 3.83 c. 4.09 d. 3.06 e. 2.87 f. 3.25

Suppose that you have been offered a 10-year lease with the following terms:

30,000 square feet of space Year 1 rent is $15 per square foot per year. Rent will escalate at 2.5% per year.

Year 1 operating expenses are expected to be $3 per square foot per year. Operating expenses are expected to escalate at a rate of 3% per year. The landlord will provide a tenant improvement allowance of $20 per square foot. The landlord is offering the following concessions: Years 1 and 2 will be rent-free. What is the effective rent for this lease? Assume a discount rate of 8% per year.

Managers at Terlingua Drilling identify a potential new drilling project. They estimate the following expected net cash flows if the project is adopted. Year 0: ($1,250,000) Year 1: $100,000 Year 2: $400,000 Year 3: $400,000 Year 4: $200,000 Year 5: $200,000 Year 6: $300,000 Year 7: $100,000 Suppose that the appropriate discount rate for this project is 11.9%, compounded annually. Calculate the net present value for this proposed project. Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. If the NPV is negative, include a minus sign. Do not type the $ symbol.

Depreciation by Three Methods; Partial Years

Layton Company purchased tool sharpening equipment on October 1 for $65,070. The equipment was expected to have a useful life of three years or 7,020 operating hours, and a residual value of $1,890. The equipment was used for 1,300 hours during Year 1, 2,500 hours in Year 2, 2,100 hours in Year 3, and 1,120 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method.

Here is project Y:

The cash flow in year 0 is negative $23,000.

The cash flow in year 1 is $32,000.

The cash flow in year 2 is $26,000.

The cash flow in year 3 is negative $12,000.

Here is project Z:

The cash flow in year 0 is negative $42,000.

The cash flow in year 1 is $58,000.

The cash flow in year 2 is $39,000.

The cash flow in year 3 is negative $35,000.

Your decision rule is to choose the project that has a higher net present value.

The discount rate is 15% for both projects.

Which project will you choose? What is the net present value of that project?