Firm W has the opportunity to invest $150,000 in a new venture. The projected cash flows from the venture are as follows.

a-1. Complete the below table to calculate NPV. Assume Firm W uses a 6 percent discount rate.

Complete the below table to calculate NPV. Assume Firm W uses a 6 percent discount rate. (Cash outflows and negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)

b-1. Complete the below table to calculate NPV. Assume Firm W uses a 3 percent discount rate.

Complete the below table to calculate NPV. Assume Firm W uses a 3 percent discount rate. (Cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)

Group of answer choices

11.05%

10.85%

10.95%

11.15%

11.25%

Group of answer choices

9.30%

9.20%

9.00%

9.10%

9.40%

Group of answer choices

4.80%

4.60%

4.70%

4.90%

5.00%

Group of answer choices

6.60%

6.70%

6.80%

7.00%

6.90%

Exercise 6-9 Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2, LO6-3]

Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:

During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $55 per unit.

Required:

1. Assume the company uses variable costing:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses absorption costing:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.

On January 1, New York Company completed the following transactions (use a 7% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1)

1. Promised to pay a fixed amount of $6,900 at the end of each year for eight years and a one-time payment of $116,800 at the end of the 8th year.
2. Established a plant remodeling fund of $491,350 to be available at the end of Year 9. A single sum that will grow to $491,350 will be deposited on January 1 of this year.
3. Agreed to pay a severance package to a discharged employee. The company will pay $75,900 at the end of the first year, $113,400 at the end of the second year, and $150,900 at the end of the third year.
4. Purchased a $174,500 machine on January 1 of this year for $34,900 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year.

Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $213,000, and Atkins' beginning partnership capital balance for the current year is $237,000. The partnership had net income of $175,000 for the year. Barber withdrew $76,000 during the year and Atkins withdrew $60,000. What is Barber's return on equity?

Multiple Choice

20.0%

40.0%

41.1%

39.0%

37.9%

Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $312,000, and Atkins' beginning partnership capital balance for the current year is $290,000. The partnership had net income of $199,000 for the year. Barber withdrew $113,000 during the year and Atkins withdrew $93,000. What is Atkins's return on equity?

Multiple Choice

33.6%

32.7%

34.3%

33.9%

17.0%

Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $368,000, and Atkins' beginning partnership capital balance for the current year is $176,000. The partnership had net income of $342,000 for the year. Barber withdrew $91,000 during the year and Atkins withdrew $28,000. What is Barber's ending equity?

Multiple Choice

$539,000

$619,000

$256,000

$448,000

$710,000

On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

Borrowed $117,600 for eight years. Will pay $7,300 interest at the end of each year and repay the $117,600 at the end of the 8th year.

Established a plant remodeling fund of $491,950 to be available at the end of Year 9. A single sum that will grow to $491,950 will be deposited on January 1 of this year.

Agreed to pay a severance package to a discharged employee. The company will pay $76,300 at the end of the first year, $113,800 at the end of the second year, and $151,300 at the end of the third year.

Purchased a $176,500 machine on January 1 of this year for $35,300 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year.

1. In transaction (a), determine the present value of the debt

2-a. In transaction (b), what single sum amount must the company deposit on January 1 of this year?

2-b. What is the total amount of interest revenue that will be earned?

3. In transaction (c), determine the present value of this obligation.

4-a. In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?

4-b. What is the total amount of interest expense that will be incurred?

The following information was drawn from the year-end balance sheets of Solomon Trading Company:

Additional information regarding transactions occurring during Year 2:

1. Investment securities that had cost $5,090 were sold. The Year 2 income statement contained a loss on the sale of investment securities of $720.

2. Equipment with a cost of $40,000 was purchased.

3. The income statement showed a gain on the sale of equipment of $5,700. On the date of sale, accumulated depreciation on the equipment sold amounted to $7,600.

4. A building that had originally cost $163,500 was demolished.

5. Land that had cost $26,100 was sold for $21,800.

Required

1. Determine the amount of cash flow for the purchase of investment securities during Year 2.

2. Determine the amount of cash flow from the sale of investment securities during Year 2.

3. Determine the cost of the equipment that was sold during Year 2.

4. Determine the amount of cash flow from the sale of equipment during Year 2.

5. Determine the amount of cash flow for the purchase of buildings during Year 2.

6. Determine the amount of cash flow for the purchase of land during Year 2.

7. Prepare the investing activities section of the Year 2 statement of cash flows.

After carefully reviewing the company’s current financial situation, management team has decided to review the Proposed budget for year 2 and you are requested to prepare revised budget in accordance with organisational budgetary requirements for year 2 & 3.

Use appropriate software to prepare the budget and then attach it to this assessment tool.

Additional information:

Annual sales are expected to increase by 20% each year

COST OF GOODS SOLD are expected to increase by 5% each year

Advertising costs are expected to increase by $500 each year

Depreciation charges are the same each year

Annual rent is expected to increase by 5% each year

Superannuation is 9.5 % of wages each year

Wages are expected to increase by 6% each year

All other operating expenses are expected to increase by 2% each year

X Company is considering a new processor that costs $150,000. Shipping and setup costs for the new processor are estimated to be $15,000. X’s working capital requirement is expected to increase by $17,000 when the new processor begins operation and is expected to be fully recoverable at the end of the project. The new processor’s useful life is expected to be 5 years and its salvage value at that point is estimated to be $60,000. The new processor is being depreciated using a 5-year ACRS life. Assume a tax rate of 35% and a cost of capital of 12%. Estimated incremental revenues and incremental cash operating expenses for the new processor before tax for each year are shown in the table below.

Q1. What is the cost of the initial outlay?

Q2. Given the initial outlay for the new processor, assume the following yearly incremental after-tax cash flows (below) . Assume a cost of capital of 12%. What is the NPV of the Project?

Q3. Given the initial outlay for the new processor, assume the following yearly incremental cash flows (below). Assume a cost of capital of 12%. What is the IRR of the Project?

1) Based on the following assumptions and financial information, select all the true statements.

(1) Selling price per unit, variable cost per unit, and total fixed costs do not change during the four years.

(2) There is no beginning inventory at Year 1.

2)

Sales above the break-even point will result in net profit equal to _______.