Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,200 per month plus $0.09 per car washed. The company actually washed 8,400 cars in August and collected an average of $6.40 per car washed.

Required:

Prepare the company’s flexible budget for August.

Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:

The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required:

1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 62 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,900 per month plus $45 per course plus $6 per student. The company’s sales should average $880 per student.

The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 54 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

(Determining relevant cash flows) Landcruisers Plus (LP) has operated an online retail store selling off-road truck parts. As the name implies, the firm specializes in parts for the venerable Toyota FJ40 that is known throughout the world for its durability and offroad prowess. The fact that Toyota stopped building and exporting the FJ40 to the U.S. market in 1982 meant that FJ40 owners depended more and more on re-manufactured parts to keep their beloved off-road vehicles running. More and more FJ40 owners are replacing the original inline six-cylinder engines with a modern American-built engine. The engine replacement requires mating the new engine with the Toyota drive train.

LP's owners had been offering engine adaptor kits for some time but have recently decided to begin building their own units. To make the adaptor kits the firm would need to invest in a variety of machine tools costing a total of $800,000. LP's management estimates that they will be able to borrow $300,000 from the firm's bank and pay 8 percent interest. The remaining funds would have to be supplied by LP's owners.

The firm estimates that they will be able to sell 1,000 units a year for $1,400 each. The units would cost $1,000 each in cash expenses to produce (this does not include depreciation expense of $80,000 per year or interest expense of

$24 000 ). After all expenses, the firm expects earnings before interest and taxes of $320,000. The firm pays taxes equal to 31 percent, which results in net income of $196 comma 800 per year over the 10 -year expected life of the equipment.

a. What is the annual free cash flow LP should expect to receive from the investment in year 1 assuming that it does not require any other investments in either capital equipment or working capital and the equipment is depreciated over a 10 -year life to a zero salvage and book value? How should the financing cost associated with the $300 comma 000 loan be incorporated into the analysis of cash flow?

b. If the firm's required rate of return for its investments is 11 percent and the investment has a 10 -year expected life, what is the anticipated NPV of the investment?

?(Determining relevant cash? flows)??Landcruisers Plus? (LP) has operated an online retail store selling? off-road truck parts. As the name? implies, the firm specializes in parts for the venerable Toyota FJ40 that is known throughout the world for its durability and offroad prowess. The fact that Toyota stopped building and exporting the FJ40 to the U.S. market in 1982 meant that FJ40 owners depended more and more on? re-manufactured parts to keep their beloved? off-road vehicles running. More and more FJ40 owners are replacing the original inline? six-cylinder engines with a modern? American-built engine. The engine replacement requires mating the new engine with the Toyota drive train. ?LP's owners had been offering engine adaptor kits for some time but have recently decided to begin building their own units. To make the adaptor kits the firm would need to invest in a variety of machine tools costing a total of ?$850,000. ?LP's management estimates that they will be able to borrow ?$340,000 from the? firm's bank and pay 8 percent interest. The remaining funds would have to be supplied by? LP's owners. The firm estimates that they will be able to sell? 1,000 units a year for ?$1,450 each. The units would cost ?$1,000 each in cash expenses to produce? (this does not include depreciation expense of ?$85,000 per year or interest expense of ?$27,200?).After all? expenses, the firm expects earnings before interest and taxes of ?$365,000. The firm pays taxes equal to 31 ?percent, which results in net income of ?$224,650 per year over the 10?-year expected life of the equipment.

a.??What is the annual free cash flow LP should expect to receive from the investment in year 1 assuming that it does not require any other investments in either capital equipment or working capital and the equipment is depreciated over a 10?-year life to a zero salvage and book? value? How should the financing cost associated with the ?$340,000 loan be incorporated into the analysis of cash? flow?

b.??If the? firm's required rate of return for its investments is13 percent and the investment has a 10?-year expected? life, what is the anticipated NPV of the?investment?

?(Determining relevant cash? flows)??Landcruisers Plus? (LP) has operated an online retail store selling? off-road truck parts. As the name? implies, the firm specializes in parts for the venerable Toyota FJ40 that is known throughout the world for its durability and offroad prowess. The fact that Toyota stopped building and exporting the FJ40 to the U.S. market in 1982 meant that FJ40 owners depended more and more on? re-manufactured parts to keep their beloved? off-road vehicles running. More and more FJ40 owners are replacing the original inline? six-cylinder engines with a modern? American-built engine. The engine replacement requires mating the new engine with the Toyota drive train. ?LP's owners had been offering engine adaptor kits for some time but have recently decided to begin building their own units. To make the adaptor kits the firm would need to invest in a variety of machine tools costing a total of ?$600,000. ?LP's management estimates that they will be able to borrow ?$360,000 from the? firm's bank and pay 8 percent interest. The remaining funds would have to be supplied by? LP's owners. The firm estimates that they will be able to sell? 1,000 units a year for ?$1,350 each. The units would cost ?$1,000 each in cash expenses to produce? (this does not include depreciation expense of ?$60,000 per year or interest expense of ?$28,800?). After all? expenses, the firm expects earnings before interest and taxes of ?$290,000. The firm pays taxes equal to 31 ?percent, which results in net income of ?$171,300 per year over the 10?-year expected life of the equipment.

a.??What is the annual free cash flow LP should expect to receive from the investment in year 1 assuming that it does not require any other investments in either capital equipment or working capital and the equipment is depreciated over a 10-year life to a zero salvage and book? value? How should the financing cost associated with the ?$360,000 loan be incorporated into the analysis of cash? flow?

b. If the? firm's required rate of return for its investments is 11 percent and the investment has a 10?-year expected? life, what is the anticipated NPV of the?investment?

Homework LP10 #2

Landcruisers Plus​ (LP) has operated an online retail store selling​ off-road truck parts. As the name​ implies, the firm specializes in parts for the venerable Toyota FJ40 that is known throughout the world for its durability and offroad prowess. The fact that Toyota stopped building and exporting the FJ40 to the U.S. market in 1982 meant that FJ40 owners depended more and more on​ re-manufactured parts to keep their beloved​ off-road vehicles running. More and more FJ40 owners are replacing the original inline​ six-cylinder engines with a modern​ American-built engine. The engine replacement requires mating the new engine with the Toyota drive train. ​LP's owners had been offering engine adaptor kits for some time but have recently decided to begin building their own units. To make the adaptor kits the firm would need to invest in a variety of machine tools costing a total of ​$ 750,000. ​LP's management estimates that they will be able to borrow 300,000 from the​ firm's bank and pay 8 percent interest. The remaining funds would have to be supplied by​ LP's owners. The firm estimates that they will be able to sell​ 1,000 units a year for ​$ 1,400 each. The units would cost ​$ 1,000 each in cash expenses to produce​ (this does not include depreciation expense of ​$ 75,000 per year or interest expense of ​$ 24,000​). After all​ expenses, the firm expects earnings before interest and taxes of ​$ 325,000. The firm pays taxes equal to 31 ​percent, which results in net income of ​$ 200,250 per year over the 10​-year expected life of the equipment. a. What is the annual free cash flow LP should expect to receive from the investment in year 1 assuming that it does not require any other investments in either capital equipment or working capital and the equipment is depreciated over a 10​-year life to a zero salvage and book​ value? How should the financing cost associated with the ​$ 300,000 loan be incorporated into the analysis of cash​ flow? b. If the​ firm's required rate of return for its investments is 7 percent and the investment has a 10​-year expected​ life, what is the anticipated NPV of the​ investment?

I.
Juarez Inc. has been operating for three years. At December 31, 2017 the accounting records reflected the following:

During the year 2018, the company had the following summarized activities:
a. Purchased short term investment for 18,000 cash.
b. Lent 14,000 to a supplier who signed a 2 years note.
c. Purchased equipment that cost 36,000; paid 12,000 cash and signed a one year not for the balance.
d. Hired a new president at the end of the year. The contract was for 170,000 per year.
e. Issued an additional 2,000 shares of capital stock for 24,000 cash.
f. Borrowed 27,000 cash from a local bank. Payable in 3 Months.
g. Purchased a patent for 6,000 cash.
h. Built an addition to the factory for 50,000; paid 18,000 cash and singed a 3 years note for the rest.
i. Returned defective equipment to the manufacturer and received a cash refund of 2,000.

Instructions:
1. Record the above transactions in the GJ and post them to the GL.
2. Prepare the balance sheet at 31 December, 2018.

II.
The trial balance of JAS manufacturing company shows the following assets at the end of December 2018:
• Cash: $380,000
• Prepaid insurance: $82,000
• Raw materials: $670,000
• Equipment: $2,200,000
• Accounts receivable: $800,000
• Work-in-process (WIP): $400,000
• Finished goods: $150,000
• Patents: $220,000

Instructions:
Prepare current assets section of the balance sheet of JAS Company.

III.

Larson’s Accounting Company has the following account balances: Cash, $10,000; Accounts Receivable, $2,000; Prepaid Rent $1,500; Supplies, $850; Equipment, $6,000; Trucks, $15,000; Accounts Payable, $2,500; Notes payable, $5,000; Common Stock, $20,000; Retained Earnings $7,850. Business transactions during December are presented as follows:
Larson paid the suppliers $500,
Supplies were purchased on account, $650
Larson purchased short term investment for $2,000.
Sold an old computed (listed under equipment’s) for $100 cash.
Sold 4,000 additional shares of stock for 20,000 cash.
Purchased new computers that cost 9,000 for 4,000 cash and the rest on account.

Instructions:
1. Record the above transactions in the GJ and post them to the GL.
2. Prepare the balance sheet.

[Type in your solutions after each question, on this document]

Tahlia fashions specialises in clothing alterations and repairs. With a slogan of ‘You ask, we sew’, they pride themselves in the fact that they deliver quick, quality work, and that no request is too big or too small for them. They have built up quite a strong reputation in the community where they are located, and are looking to expand their reach to customers outside of the traditional borders of their business.

      As part of their expansion plan, they are looking to replace some of their outdated sewing machines with state-of-the-art, heavy-duty, industrial sewing machines. The new machinery costs R150 000 and with installation cost of R10 000. Tahlia can sell their old machines for a total of R40 000, but must deliver them to the buyer at a cost of R2 500. Tahlia originally bought the machines 4 years ago for a total of R80 000, and was depreciated on a straight-line basis over a period of 5 years. The firm is subject to a 28% tax rate. The capital expenditure results in an increase in net working capital of R18 000.

a)Determine the initial investment of Tahlia’s capital expenditure or initial investment.

b)Assume that this new investment made by Tahlia can be depreciated on a straight-line basis over a 5 year period. The firm has made the following projections of the expected incremental increases in net operating profit after taxes (NOPAT) for the 5-year life of the investment:

      Determine the expected operating cash inflows for Tahlia’s firm for each of the 5 years.

      (use table below), or create your own table.

c)Assume it is 4 years after Tahlia the purchased the new machine, she sells it to a competitor for R48 000. The net working capital of R18 000 is recovered and the firm is still subject to a 28% tax rate. Calculate the terminal cash flow of this investment as well as the net cash flow for Tahlia for Year 4.

​(Determining relevant cash​ flows) Landcruisers Plus​ (LP) has operated an online retail store selling​ off-road truck parts. As the name​ implies, the firm specializes in parts for the venerable Toyota FJ40 that is known throughout the world for its durability and offroad prowess. The fact that Toyota stopped building and exporting the FJ40 to the U.S. market in 1982 meant that FJ40 owners depended more and more on​ re-manufactured parts to keep their beloved​ off-road vehicles running. More and more FJ40 owners are replacing the original inline​ six-cylinder engines with a modern​ American-built engine. The engine replacement requires mating the new engine with the Toyota drive train.

​LP's owners had been offering engine adaptor kits for some time but have recently decided to begin building their own units. To make the adaptor kits the firm would need to invest in a variety of machine tools costing a total of ​$550,000. ​LP's management estimates that they will be able to borrow $360,000 from the​ firm's bank and pay 8 percent interest. The remaining funds would have to be supplied by​ LP's owners. The firm estimates that they will be able to sell​ 1,000 units a year for ​$1,400 each. The units would cost $1,000 each in cash expenses to produce​ (this does not include depreciation expense of $55,000 per year or interest expense of $28,800​). After all​ expenses, the firm expects earnings before interest and taxes of $345,000. The firm pays taxes equal to 38 ​percent, which results in net income of $185,100 per year over the 10​-year expected life of the equipment.

a.) What is the annual free cash flow LP should expect to receive from the investment in year 1 assuming that it does not require any other investments in either capital equipment or working capital and the equipment is depreciated over a 10​-year life to a zero salvage and book​ value? How should the financing cost associated with the $360,000 loan be incorporated into the analysis of cash​ flow? (drop down menu asks if it SHOULD or SHOULD NOT be incorporated)

b.) If the​ firm's required rate of return for its investments is 11 percent and the investment has a 10​-year expected​ life, what is the anticipated NPV of the​ investment?