Always Fresh is in the business of delivering home meal kits. Noah the Chief Marketing Officer for Always Fresh wants to assess how much the firm is worth. To do so, Noah assesses transactional data for 2019 (Prior research in Finance has concluded that 1 year of transaction data is an acceptable amount of time to arrive at firm value).

Always Fresh has two SKU's (Stock keeping units) - individual meals and a bouquet of 10 meals. Each is delivered directly to the customer's doorsteps. To keep the operation lean, Always Fresh has followed a 100% digital business model by not owning any physical property. It has partnered with certified professionals across the country who source, pack, and ship the orders. The following is the transactional data for 2019.

For individual meal customers, Always Fresh spent USD 6.3 mn dollars in 2019 to acquire them. The retention rate for these customers is 15% per annum and Always Fresh makes a 30% margin on these orders.

For customers that order 10 meals, Always Fresh spent USD 2.1 mn dollars in 2019 to acquire them. The retention rate for these customers is 22% and Always Fresh makes a hefty 40% margin on these orders.

Based on the above information, you have to help Noah in computing the customer value Always Fresh.

You can assume the discount rate to be 2%. As time is not mentioned, you should assume time to be infinity.

Always Fresh is in the business of delivering home meal kits. Noah the Chief Marketing Officer for Always Fresh wants to assess how much the firm is worth. To do so, Noah assesses transactional data for 2019 (Prior research in Finance has concluded that 1 year of transaction data is an acceptable amount of time to arrive at firm value).

Always Fresh has two SKU's (Stock keeping units) - individual meals and a bouquet of 10 meals. Each is delivered directly to the customer's doorsteps. To keep the operation lean, Always Fresh has followed a 100% digital business model by not owning any physical property. It has partnered with certified professionals across the country who source, pack, and ship the orders. The following is the transactional data for 2019.

For individual meal customers, Always Fresh spent USD 6.3 mn dollars in 2019 to acquire them. The retention rate for these customers is 15% per annum and Always Fresh makes a 30% margin on these orders.

For customers that order 10 meals, Always Fresh spent USD 2.1 mn dollars in 2019 to acquire them. The retention rate for these customers is 22% and Always Fresh makes a hefty 40% margin on these orders.

Based on the above information, you have to help Noah in computing the customer value Always Fresh.

You can assume the discount rate to be 2%. As time is not mentioned, you should assume time to be infinity.

Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. The following six-column table contains the company’s unadjusted trial balance as of December 31, 2018.

The following information in a through h applies to the company at the end of the current year.

a. The bank reconciliation as of December 31, 2018, includes the following facts.

Reported on the bank statement is a canceled check that the company failed to record. (Information from the bank reconciliation allows you to determine the amount of this check, which is a payment on an account payable.)

b. An examination of customers’ accounts shows that accounts totaling $679 should be written off as uncollectible. Using an aging of receivables, the company determines that the ending balance of the Allowance for Doubtful Accounts should be $700.

c. A truck is purchased and placed in service on January 1, 2018. Its cost is being depreciated with the straight-line method using the following facts and estimates.

d. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2016. They are being depreciated with the straight-line method using these facts and estimates.

e. On August 1, 2018, the company is paid $3,840 cash in advance to provide monthly service for an apartment complex for one year. The company began providing the services in August. When the cash was received, the full amount was credited to the Extermination Services Revenue account.

f. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 2.5% of the extermination services revenue of $67,760 for 2018. No warranty expense has been recorded for 2018. All costs of servicing warranties in 2018 were properly debited to the Estimated Warranty Liability account.

g. The $15,000 long-term note is an 8%, five-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2018.

h. The ending inventory of merchandise is counted and determined to have a cost of $11,700. Bug-Off uses a perpetual inventory system.

Required:

1. Use the preceding information to determine amounts for the following items.

a. Correct (reconciled) ending balance of Cash, and the amount of the omitted check.

b. Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.

c. Depreciation expense for the truck used during year 2018.

d. Depreciation expense for the two items of equipment used during year 2018.

e. The adjusted 2018 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts.

f. The adjusted 2018 ending balances of the Warranty Expense and the Estimated Warranty Liability accounts.

g. The adjusted 2018 ending balances of the Interest Expense and the Interest Payable accounts.

2. Use the results of part 1 to complete the six-column table by first entering the appropriate adjustments for items a through g and then completing the Adjusted Trial Balance columns. (Hint: Item b requires two adjustments.)

3. Prepare journal entries to record the adjustments entered 4n the six-column table. Assume Bug-Off’s adjusted balance for Merchandise Inventory matches the year-end physical count.

4-a. Prepare a single-step income statement for year 2018.

4-b. Prepare a statement of retained earnings (cash dividends during 2018 were $10,000) for year 2018.

4-c. Prepare a classified balance sheet as at 2018.

Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. Following is the company's unadjusted trial balance as of December 31, 2017.

The following information in a through h applies to the company at the end of the current year.

a. The bank reconciliation as of December 31, 2017, includes the following facts.

Reported on the bank statement is a canceled check that the company failed to record. (Information from the bank reconciliation allows you to determine the amount of this check, which is a payment on an account payable.)

b. An examination of customers’ accounts shows that accounts totaling $679 should be written off as uncollectible. Using an aging of receivables, the company determines that the ending balance of the Allowance for Doubtful Accounts should be $700.

c. A truck is purchased and placed in service on January 1, 2017. Its cost is being depreciated with the straight-line method using the following facts and estimates.

d. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2015. They are being depreciated with the straight-line method using these facts and estimates.

e. On August 1, 2017, the company is paid $3,840 cash in advance to provide monthly service for an apartment complex for one year. The company began providing the services in August. When the cash was received, the full amount was credited to the Extermination Services Revenue account.

f. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 2.5% of the extermination services revenue of $57,760 for 2017. No warranty expense has been recorded for 2017. All costs of servicing warranties in 2017 were properly debited to the Estimated Warranty Liability account.

g. The $15,000 long-term note is an 8%, five-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2017.

h. The ending inventory of merchandise is counted and determined to have a cost of $11,700. Bug-Off uses a perpetual inventory system.

Required:
1. Determine amounts for the following items:  

1. Correct (reconciled) ending balance of Cash, and the omitted check amount.
2. Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.
3. Depreciation expense for the truck used during year 2017.
4. Depreciation expense for the two items of equipment used during year 2017.
5. The adjusted 2017 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts.
6. The adjusted 2017 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability.
7. The adjusted 2017 ending balances of the accounts for Interest Expense and Interest Payable.

2. Use the results of part 1 to complete the six-column table by first entering the appropriate adjustments for items a through g and then completing the adjusted trial balance columns. (Hint: Item b requires two adjustments.)
3. Prepare journal entries to record the adjustments entered on the six-column table. Assume Bug-Off’s adjusted balance for Merchandise Inventory matches the year-end physical count.
4a. Prepare a single-step income statement for year 2017.
4b. Prepare a statement of owner’s equity (cash withdrawals during 2017 were $10,000) for year 2017 and there were no investments by the owner in the current year.
4c. Prepare a classified balance sheet as at 2017.

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.5 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. If the land were sold today, the net proceeds would be $5 million after taxes. In five years, the land will be worth $5.3 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $15 million to build. The following market data on DEI’s securities are current: Debt: 40,000 6.2 percent coupon bonds outstanding, 25 years to maturity, selling for 95 percent of par; the bonds have a $1,000 par value each and make semiannual payments. Common stock: 825,000 shares outstanding, selling for $97 per share; the beta is 1.15. Preferred stock: 45,000 shares of 5.8 percent preferred stock outstanding, selling for $95 per share. Market: 7 percent expected market risk premium; 3.8 percent risk-free rate. DEI’s tax rate is 34 percent. The project requires $825,000 in initial net working capital investment to get operational. Requirement 1: Calculate the project’s Time 0 cash flow, taking into account all side effects. Assume that any NWC raised does not require floatation costs. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Initial time 0 cash flow $ Requirement 2: The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of +2 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI’s project. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Discount rate % Requirement 3: The manufacturing plant has an eight-year tax life, and DEI uses straightline depreciation. At the end of the project (i.e., the end of year 5), the plant can be scrapped for $2.1 million. What is the aftertax salvage value of this manufacturing plant? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Aftertax salvage value $ Requirement 4: The company will incur $3,500,000 in annual fixed costs. The plan is to manufacture 12,000 RDSs per year and sell them at $10,800 per machine; the variable production costs are $9,900 per RDS. What is the annual operating cash flow, OCF, from this project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Operating cash flow $ Requirement 5: (a) Calculate the net present value. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Net present value $ (b) Calculate the internal rate of return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Internal rate of return %

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.5 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. If the land were sold today, the net proceeds would be $5 million after taxes. In five years, the land will be worth $5.3 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $15 million to build. The following market data on DEI’s securities are current: Debt: 40,000 6.2 percent coupon bonds outstanding, 25 years to maturity, selling for 95 percent of par; the bonds have a $1,000 par value each and make semiannual payments. Common stock: 825,000 shares outstanding, selling for $97 per share; the beta is 1.15. Preferred stock: 45,000 shares of 5.8 percent preferred stock outstanding, selling for $95 per share. Market: 7 percent expected market risk premium; 3.8 percent risk-free rate. DEI’s tax rate is 34 percent. The project requires $825,000 in initial net working capital investment to get operational.

Requirement 1: Calculate the project’s Time 0 cash flow, taking into account all side effects. Assume that any NWC raised does not require floatation costs. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Initial time 0 cash flow $

Requirement 2: The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of +2 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI’s project. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Discount rate %

Requirement 3: The manufacturing plant has an eight-year tax life, and DEI uses straightline depreciation. At the end of the project (i.e., the end of year 5), the plant can be scrapped for $2.1 million. What is the aftertax salvage value of this manufacturing plant? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Aftertax salvage value $

Requirement 4: The company will incur $3,500,000 in annual fixed costs. The plan is to manufacture 12,000 RDSs per year and sell them at $10,800 per machine; the variable production costs are $9,900 per RDS. What is the annual operating cash flow, OCF, from this project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Operating cash flow $

Requirement 5: (a) Calculate the net present value. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Net present value $ (b) Calculate the internal rate of return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Internal rate of return %

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.5 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. If the land were sold today, the net proceeds would be $5 million after taxes. In five years, the land will be worth $5.3 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $15 million to build. The following market data on DEI’s securities are current: Debt: 40,000 6.2 percent coupon bonds outstanding, 25 years to maturity, selling for 95 percent of par; the bonds have a $1,000 par value each and make semiannual payments. Common stock: 825,000 shares outstanding, selling for $97 per share; the beta is 1.15. Preferred stock: 45,000 shares of 5.8 percent preferred stock outstanding, selling for $95 per share. Market: 7 percent expected market risk premium; 3.8 percent risk-free rate. DEI’s tax rate is 34 percent. The project requires $825,000 in initial net working capital investment to get operational.

Requirement 1: Calculate the project’s Time 0 cash flow, taking into account all side effects. Assume that any NWC raised does not require floatation costs. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Requirement 2: The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of +2 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI’s project. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Requirement 3: The manufacturing plant has an eight-year tax life, and DEI uses straightline depreciation. At the end of the project (i.e., the end of year 5), the plant can be scrapped for $2.1 million. What is the aftertax salvage value of this manufacturing plant? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Requirement 4: The company will incur $3,500,000 in annual fixed costs. The plan is to manufacture 12,000 RDSs per year and sell them at $10,800 per machine; the variable production costs are $9,900 per RDS. What is the annual operating cash flow, OCF, from this project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Requirement 5: (a) Calculate the net present value. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) (b) Calculate the internal rate of return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.5 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. If the land were sold today, the net proceeds would be $5 million after taxes. In five years, the land will be worth $5.3 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $15 million to build. The following market data on DEI’s securities are current: Debt: 40,000 6.2 percent coupon bonds outstanding, 25 years to maturity, selling for 95 percent of par; the bonds have a $1,000 par value each and make semiannual payments. Common stock: 825,000 shares outstanding, selling for $97 per share; the beta is 1.15. Preferred stock: 45,000 shares of 5.8 percent preferred stock outstanding, selling for $95 per share. Market: 7 percent expected market risk premium; 3.8 percent risk-free rate. DEI’s tax rate is 34 percent. The project requires $825,000 in initial net working capital investment to get operational. Requirement 1: Calculate the project’s Time 0 cash flow, taking into account all side effects. Assume that any NWC raised does not require floatation costs. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Initial time 0 cash flow $ Requirement 2: The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of +2 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI’s project. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Discount rate % Requirement 3: The manufacturing plant has an eight-year tax life, and DEI uses straightline depreciation. At the end of the project (i.e., the end of year 5), the plant can be scrapped for $2.1 million. What is the aftertax salvage value of this manufacturing plant? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Aftertax salvage value $ Requirement 4: The company will incur $3,500,000 in annual fixed costs. The plan is to manufacture 12,000 RDSs per year and sell them at $10,800 per machine; the variable production costs are $9,900 per RDS. What is the annual operating cash flow, OCF, from this project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Operating cash flow $ Requirement 5: (a) Calculate the net present value. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Net present value $ (b) Calculate the internal rate of return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Internal rate of return %

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $7.3 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. If the land were sold today, the net proceeds would be $7.78 million after taxes. In five years, the land will be worth $8.08 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $13.72 million to build. The following market data on DEI’s securities are current: Debt: 93,600 7.1 percent coupon bonds outstanding, 25 years to maturity, selling for 93.2 percent of par; the bonds have a $1,000 par value each and make semiannual payments. Common stock: 1,840,000 shares outstanding, selling for $95.80 per share; the beta is 1.11. Preferred stock: 87,000 shares of 6.35 percent preferred stock outstanding, selling for $93.80 per share. Market: 7.1 percent expected market risk premium; 5.05 percent risk-free rate. DEI’s tax rate is 23 percent. The project requires $915,000 in initial net working capital investment to get operational. a. Calculate the project’s Time 0 cash flow, taking into account all side effects. Assume that any NWC raised does not require floatation costs. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b. The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of +3 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI’s project. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. The manufacturing plant has an eight-year tax life, and DEI uses straight-line depreciation. At the end of the project (i.e., the end of Year 5), the plant can be scrapped for $1.68 million. What is the aftertax salvage value of this manufacturing plant? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) d. The company will incur $2,480,000 in annual fixed costs. The plan is to manufacture 14,800 RDSs per year and sell them at $12,200 per machine; the variable production costs are $11,400 per RDS. What is the annual operating cash flow, OCF, from this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) e. Calculate the project's net present value. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) f. Calculate the project's internal rate of return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)