Bottoms Up Diaper Service is considering the purchase of a new industrial washer for a 4-year project. The old machine was bought 3 years ago for $10,000 and will be depreciated to 1,000 using straight-line method with an assume life of 5 years. Actually, the old machine can be sold for $8,000 now. The new washer can be installed today for $12,000. The new machine will have a 3-year life and will be depreciated to $3,000 using straight-line depreciation. At the end of the project life, the after-tax cash flow of selling the machine is $3,000. With the new washer, the firm is expected to have revenue of $10,000, $12,000, and $13,000 for each of the next three years. The COGS is 40% of the revenue, and the SG&A is $3,000 each year. Suppose Bottoms Up Diaper Service’s inventories are 15% of total expense. If the opportunity cost of capital is 9%, and corporate tax rate is 35%, what is the project’s NPV?

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

"There are different sections that make up a classified income statement. The first section is operating revenue, this is the revenue that is earned from normal business activities. The next section is the cost of goods sold, where the information pertaining to the cost of merchandise sold during that period; three entries are needed for this section: beginning inventory, net delivered cost of purchases, and ending inventory. The next section is gross profit, which is the difference in net sales and cost of goods sold. Operating expenses are the expenses that are accumulated during normal business activities. Net income and net loss from operations is separated for easier readability. Other expenses and incomes are entered into different sections along with net income and net losses. Sometimes a condensed income statement is provided with summarized information in fewer lines of information." Is this information substantially different from the income statement that you would normally consider? Why do we call it classified?

1. a) You’re a marketing analyst for Hasbro Toys. You get the following data:

   Compute and interpret the sample correlation coefficient between advertising expenditure and sales revenue.

b) An experiment results in one of the following sample points: E₁, E₂, E₃, E₄, or E₅.

    Find P(E₃) if P(E₁) = 2P(E₃), P(E₂₎= 0.1, P(E₄) =0 .2 and P(E₅) = 0.1

c) For each of the random variables defined below, what values may each of the random variables X assume?

(i) (1 point) X=the number of newspapers sold by the New York Times each month

(ii) (1 point) X= amount of ink used in printing the Sunday edition of the New York Times.

In the Chicago mayor's race, candidate A proposes a project that will cost $200,000 today (t=0), $100,000 next year (t=1) and $15,000 to destroy it after ten years of operation (t=12) when the project is discontinued. Once finished in three years (t=3), it will generate a flow of revenue of $40,000 per year until it is discontinued in (t=12) - ie in t=12 the project generates that flow of revenue too.

1. Set the discount rate as r and write the expected present value of the costs and benefits.

2. Calculate the present value of the project if the discount rate is r=.1

3. Candidate B considers that a discount rate r=.3 is more realistic. Calculate the present value of the project with this new discount rate proposed by Candidate B. Why do you think Candidate B has an interest in convincing the public that her discount rate is more realistic?

The following facts are known:

Cost of the expansion $2,000,000

The Manager is paid $90,000 per year. Compensation will not change due to the expansion

Property taxes will increase by $33,000 annually

The expansion will add 10 rooms and it is expected all 10 will be occupied by paying guests

The addition of the 10 guests each day is expected to add $750,000 of revenue annually

A garden and patio that was built last summer at a cost of $65,000 will be removed to make way for the expansion.

Additional cost of staff based on 10 occupied rooms is $250,000 annually

Additional cost of supplies and food based on 10 occupied rooms $80,000 annually

All expenses are expected to increase 3% annually. Due to competition revenue is expected to increase only 2% annually.

The useful life of the expansion is 8 years. Bradford uses a 9% discount rate.

Create an 8 year proforma cash flow statement for the expansion project (assume there are no income taxes)

Question 3 Scranton Motors Ltd faced the following situations. Journalize the adjusting entry needed at year end for each situation. Each scenario should be considered independently. The business has interest expense of $9,000 early in January 2017. Interest revenue of $3,000 has been earned but not yet received. When the business collected $12,000 in advance three months ago, the accountant debited Cash and credited Unearned Revenue. The client was paying for two cars, one delivered in December, the other to be delivered in February 2017. Salary expense is $1,000 per day – Monday through Friday – and the business pays employees each Friday. For example purposes, assume that this year, December 31 falls on a Tuesday. The unadjusted balance of the Supplies account is $3,100. The total cost of supplies on hand is $800. Equipment was purchased at the beginning of this year at a cost of $60,000. The equipment’s useful life is five years. Record the depreciation for this year and then determine the equipment’s carrying amount.

form the balance sheet for the following two companies

1)

Auto Wash Bot Ltd.

Income Statement

For the Year Ended December 31, 2015

2)

Popeye’s Muscle Wash Ltd

Income Statement

For the Year Ended December 31, 2015

*Tax rate of 15.5% used.

Universal Foods issued 10% bonds, dated January 1, with a face amount of $190 million on January 1, 2018 to Wang Communications. The bonds mature on December 31, 2032 (15 years). The market rate of interest for similar issues was 12%. Interest is paid semiannually on June 30 and December 31. Universal uses the straight-line method. Universal Foods sold the entire bond issue to Wang Communications. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1-3. Prepare the journal entry to record the purchase of the bonds by Wang Communications on January 1, 2018, interest revenue on June 30, 2018 and interest revenue on December 31, 2025. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Universal Foods issued 10% bonds, dated January 1, with a face amount of $190 million on January 1, 2018 to Wang Communications. The bonds mature on December 31, 2032 (15 years). The market rate of interest for similar issues was 12%. Interest is paid semiannually on June 30 and December 31. Universal uses the straight-line method. Universal Foods sold the entire bond issue to Wang Communications. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1-3. Prepare the journal entry to record the purchase of the bonds by Wang Communications on January 1, 2018, interest revenue on June 30, 2018 and interest revenue on December 31, 2025. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)