Speedy Delivery Company purchases a delivery van for $33,600. Speedy estimates that at the end of its four-year service life, the van will be worth $5,200. During the four-year period, the company expects to drive the van 177,500 miles.

Actual miles driven each year were 46,000 miles in year 1 and 51,000 miles in year 2.

Required:

Calculate annual depreciation for the first two years of the van using each of the following methods. (Do not round your intermediate calculations.)

  
1. Straight-line.

Year Annual Depreciation

1 ?

2 ?

2. Double-declining-balance.

Year Annual Depreciation

1 ?

2 ?

   
3. Activity-based.

Year Annual Depreciation

1 ?

2 ?

A company is deciding whether to lease or purchase an asset. In this question we will evaluate the NPV of the purchase decision. The capital cost required to purchase the asset is $1,000,000 (at time zero) with a salvage value of $500,000 at the end of the 5th year. The purchased asset can be depreciated based on MACRS 5-year life depreciation with the half year convention (table A-1 at IRS (Links to an external site.)Links to an external site.) over six years (from year 0 to year 5). The asset would yield annual revenue of $350,000 for five years (from year 1 to year 5) and operating cost of $60,000 for year 1 to 5. If the income tax is 40% and the annual discount rate is 16%, calculate the NPV for the purchase decision

If the applicable discount rate is 15%, what is the NPV of the following investment? Round to the nearest cent. The project is expected to cost $81,000 immediately, and generate the following annual cash flows: Year 1: $29,000 Year 2: $35,000 Year 3: $64,000 Year 4: $21,000

You want to start an organic garlic farm. The farm costs $300,000, to be paid in full immediately. Year 1 cash flows will be $36,000, and grow at 6% a year into year 5 when you decide to sell the farm at the end of the year for $360,000. Assuming these estimates are all correct, what is the IRR of the garlic farm investment? Round to the tenth of a percent (eg 5.6%=5.6). [Hint: You'll want to solve this in Excel using Goal Seek]

a. Assuming that the expectations hypothesis is valid, compute the price of the four-year bond shown below at the end of (i) the first year; (ii) the second year; (iii) the third year; (iv) the fourth year. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. What is the rate of return of the bond in years 1, 2, 3, and 4? Conclude that the expected return equals the forward rate for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Upper Division of Lower Company acquired an asset with a cost of $560,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows.

The cost of the asset is expected to increase at a rate of 10 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes.

Required:

a. What is the ROI for each year of the asset's life, using a historical cost approach?

b. What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year?

1. HF Corporation just paid a dividend of $4.00. The dividend is expected to grow by 8% this year, 6% in year two and 5% in year three. Beginning in year four, the dividend is expected to grow at a constant rate of 4%. With a required return of 10%, what is a share of this company’s stock worth today?
2. TP Company report FCF of $800,000 in the most recently completed year. FCF is expected to grow by 10% this year and 7% in year two. Beginning in year three, FCF is expected to grow at a constant and sustainable rate of 5%. The required rate of return on this stock is 12%. The company has debt of $3,500,000, preferred stock of $1,200,000 and 500,000 common shares outstanding. What is a share of this company’s common stock worth today ?

1.  You expect to have $20,000 in one year. A bank is offering loans at 4% interest per year. How much can you borrow?

2. Your friend’s mom is thinking of retiring. Her retirement plan will pay her either $225,000 immediately or $325,000 five years after the date of her retirement. Which alternative should she choose if the interest rate is a. 0% per year? b. 8% per year? c. 20% per year?

a. 0% per year? b. 8% per year? c. 20% per year?

3. You are considering a savings bond that will pay $200 in 10 years. If the interest rate is 2%, what should you pay today for the bond?

Walther Corporation is deciding between purchasing needed equipment or leasing it. If purchased, it has calculated its total expected after-tax cash outflows each year as follows: Year 1 $250,000; Year 2 $225,000; Year 3 $200,000; Year 4 $150,000; and Year 5 $100,000 with annual cash flows assumed to be generated evenly throughout the year (use the mid-year adjustment). If leased, the annual after-tax lease payment of $187,500 would be due at the beginning of each of the next five years. The company’s cost of debt is 5%. What is the net advantage to leasing (NAL)? If leasing is more expensive, be certain to place a negative sign before your answer. show work in excel!

Speedy Delivery Company purchases a delivery van for $41,600. Speedy estimates that at the end of its four-year service life, the van will be worth $6,000. During the four-year period, the company expects to drive the van 222,500 miles.

Actual miles driven each year were 58,000 miles in year 1 and 64,000 miles in year 2.

Required:

Calculate annual depreciation for the first two years of the van using each of the following methods. (Do not round your intermediate calculations.)

  
1. Straight-line.

Year Annual Depreciation

1

2

2. Double-declining-balance.

Year Annual Depreciation

1

2

   
3. Activity-based.

Year Annual Depreciation

1

2

Five years ago, a company made a $5 million investment in a new high-temperature material. The product was not well accepted after the first year on the market. However, when it was reintroduced 4 years later, it did sell well during the year. Major research funding to broaden the applications has cost $15 million in year 5. Determine the rate of return for these cash flows (shown below in $1000s). Year Net Cash Flow, $ 0 –5,000 1 4,000 2 0 3 0 4 20,000 5 –15,000 Question 4 options: i* = 48.4% per year i* = 34.6% per year i* = 38.5% per year i* = 44.1% per year