QUESTION 97
A company is considering the purchase of a new production line that it has estimated will generate the following annual cash flows: $5,710,498 per year for 8 years, followed by $7,672,287 per year for 2 years, followed by $3,519,326 per year for 15 years. All cash flows will be received at the end of the year. If the company's required rate of return is 12.4%, what is the maximum price at which the company will purchase this new line? State your answer to the nearest whole dollar.
QUESTION 98
Assume that you will receive $8,766 per year for 4 years, followed by $4,590 per year for 8 years, followed by $7,686 per year for 3 years. All cash flows are to be received at the end of the year. If the required rate of return is 14.9%, what is the present value of these cash flows? State your answer to the nearest whole dollar.
In: Finance
Chubbyville purchases a delivery van for $24,100. Chubbyville estimates a four-year service life and a residual value of $1,900. During the four-year period, the company expects to drive the van 104,000 miles. 1. Straight-line. 2. Double-declining-balance. (Round your depreciation rate to 2 decimal places. Round your final answers to the nearest whole dollar.) 3. Actual miles driven each year were 24,000 miles in Year 1; 32,000 miles in Year 2; 22,000 miles in Year 3; and 24,000 miles in Year 4. Note that actual total miles of 102,000 fall short of expectations by 2,000 miles. Calculate annual depreciation for the four-year life of the van using activity-based. (Round your depreciation rate to 2 decimal places. Round your final answers to the nearest whole dollar.)
In: Accounting
Data for Cash Flow Estimation for an Expansion Project
• Cost of new equipment: $200,000
• Life of the project: 5 years
• Depreciation for equipment: Straight-line to zero over five
years
• Investment (increase) in net working capital: $30,000
• Annual sales: $220,000
• Annual cash operating expenses: $90,000
• Income tax rate: 40%
• At the end of year five, the company will sell off the equipment
for $50,000.
• At the end of year five, the firm will recover the net working
capital investment of $30,000.
What is the total initial investment outlay in Year 0?
What is the depreciation amount in Year 1?
What is the operating income BEFORE taxes in Year 1?
What is the operating income AFTER taxes in Year 1?
What is the after-tax operating cash flow in Year 1?
What is the total terminal year after-tax non-operating cash flow?
In: Finance
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Comparing three depreciation methods Dexter Industries purchased packaging equipment on January 8 for $72,000. The equipment was expected to have a useful life of three years, or 14,400 operating hours, and a residual value of $3,600. The equipment was used for 5,760 hours during Year 1, 4,320 hours in Year 2, and 4,320 hours in Year 3. Required: 1. Determine the amount of depreciation expense for the three years ending December 31, by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the three years by each method. Round the final answers for each year to the nearest whole dollar.
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In: Accounting
Diebold Incorporated
Diebold Incorporated manufactures, markets, and services automated teller machines in the United States. The following are selected numbers from the financial statements for Year 1 and Year 2 (in millions):
Year 1 Year 2
Revenues $ 544.0 $ 620.0
Operating Expenses (465.1) (528.5)
Depreciation (12.5) (14.0)
= Earnings before Interest and Taxes 66.4 77.5
Interest Expenses 0.0 0.0
Taxes (25.3) (29.5)
= Net Income $ 41.1 $ 48.0
Working Capital $ 175.0 $ 240.0
The firm had capital expenditures of $15 million in Year 1 and $18 million in Year 2. The working capital in Year 0 was $180 million. In Year 3 and into the future, the firm expects $40 million in free cash flows. Its WACC is 7.5 percent and expected growth rate is 2.5 percent.
What is the market value of equity? Explain any assumptions.
In: Finance
Throughout the year, Johnson Inc. had the following shares outstanding. There were no shares issued or repurchased during the year.
Preferred shares, $3.00, unlimited number authorized,60,000 issued and outstanding $12,000,000
Common shares, unlimited number authorized, 420,000 issued and outstanding . 24,000,000
Total contributed capital $36,000,000
Net income for the year was $ 1,590,000.
Loss from discontinued operations (net of tax)of $-159,000was included in net income for the year.
Required:
Prepare the basic EPS presentation for the company assuming:
1.The preferred shares are non-cumulative, preferred dividends of $180,000were paid during the year.
2.The preferred shares are non-cumulative, and no dividends were paid during the year.
3.The preferred shares are cumulative, and no dividends were paid during the year.
4.The preferred shares are cumulative, and 2years of dividends and the current dividends were paid in the year.
In: Accounting
In: Economics
The Hazim Company is a wholesale distributor of automotive replacement parts. For purposes of
this question, assume on January 1, year 3, Hazim Co. adopted the dollar-value LIFO method of
determining inventory costs for financial and income-tax reporting. The following information relates
to this change:
Hazim has continued to use the FIFO method for internal reporting purposes. Hazim's FIFO
inventories at December 31, Year 3, Year 4, and Year 5, were $100,000, $137,500, and $195,000,
respectively.
The FIFO inventory amounts are converted to dollar-value LIFO amounts using a single inventory
pool and annual cost indexes. Hazim uses the annual indexes developed by its industry trade
association: 1.25 for year 4 and 1.50 for year 5.
Calculate Hazim's dollar-value LIFO inventory at December 31, Year 4 and Year 5. Show all
calculations
In: Accounting
When determining incremental unlevered net income, should all the expenses listed be included? If not, what expenses should we exclude and why?
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Initial Capital Expenditure |
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Useful Life of Equipment |
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Annual Depreciation |
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Sales in Year 1 |
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Sales Growth through Year 6 |
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Sales Growth Year 6 Onward |
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Free Cash Flow Year 6 Onward |
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Cost of Goods Sold (% of sales) |
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Incremental SG&A Expense 25% of the Incremental SG&A Expense is an overhead expense that will be incurred even if the project is not accepted. |
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Market Research Expense This research was completed last month to be paid by the end of next year |
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Initial Net Working Capital |
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Accounts Receivable % of Next Year Sales |
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Inventory % of Next Year COGS |
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Accounts Payable % of Next Year COGS |
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Interest Expense |
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Average Tax Rate |
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Cost of Capital |
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Marginal Tax Rate |
In: Finance
Abe's Steakhouse is the largest upscale steakhouse company in the United States, based on total company- and franchisee-owned restaurants. The company's menu features a broad selection of high-quality steaks and other premium offerings. Assume the information below is from a recent annual report:
a. Common stock, $0.01 par value; 100,090,000 shares authorized; 23,563,356 issued and outstanding at the end of the current year, 23,385,356 issued and outstanding at the end of last year.
b. Additional paid-in capital: $194,389,000 at the end of the current year and $169,431,000 at the end of last year.
c. Retained earnings / (accumulated deficit): ($82,397,000) at the end of last year.
d. In the current year, net income was $53,983,000 and a cash dividend of $7,138,000 was paid.
Required:
Prepare the stockholders’ equity section of the balance sheet to reflect the above information for the current year and last year. (Amounts to be deducted should be indicated with a minus sign.)
In: Finance