Molly Grey (single) acquired a 30 percent limited partnership interest in Beau Geste LLP several years ago for $52,500. At the beginning of year 1, Molly has tax basis and an at-risk amount of $28,500. In year 1, Beau Geste incurs a loss of $201,500 and does not make any distributions to the partners.
b. Based on the above information, complete the following table:
1. Cumulative total passive suspended losses:
2.
| Year 2 AGI: | |
| AGI before Beau Geste: | _________ |
| Year 2 passive income from Beau Geste | _________ |
| Year 2 allowed passive losses | _________ |
| Year 2 AGI | _________ |
In: Accounting
|
our company is deciding whether to invest in a new machine. The new machine will increase cash flow by $329,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,700,000. The cost of the machine will decline by $100,000 per year until it reaches $1,200,000, where it will remain. |
|
If your required return is 14 percent, calculate the NPV today. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
|
NPV |
$ |
|
If your required return is 14 percent, calculate the NPV for the following years. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. A negative answer should be indicated by a minus sign.) |
|
|
|
|
Year 1 |
$ |
|
Year 2 |
$ |
|
Year 3 |
$ |
|
Year 4 |
$ |
|
Year 5 |
$ |
|
Year 6 |
$ |
|
Should you purchase the machine? |
|
Yes No |
|
If so, when should you purchase it? |
|
Today One year from now Two years from now |
In: Finance
| Castle View Games would like to invest in a division to develop software for video games. To evaluate this decision, the firm first attempts to project the working capital needs for this operation. Its chief financial officer has developed the following estimates (in millions of dollars): | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Cash | 6 | 12 | 15 | 15 | 15 |
| Accounts receivable | 21 | 22 | 24 | 24 | 24 |
| Inventory | 5 | 7 | 10 | 12 | 13 |
| Accounts payable | 18 | 22 | 24 | 25 | 30 |
| Assuming that Castle View currently does not have any working capital invested in this division, calculate the cash flows associated with changes in working capital for the first five years of this investment. | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Cash | 6.00 | 12.00 | 15.00 | 15.00 | 15.00 |
| Accounts receivable | 21.00 | 22.00 | 24.00 | 24.00 | 24.00 |
| Inventory | 5.00 | 7.00 | 10.00 | 12.00 | 13.00 |
| Accounts payable | 18.00 | 22.00 | 24.00 | 25.00 | 30.00 |
| Net Working Capital | |||||
| Net change in working capital | |||||
In: Accounting
On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and also signed a 3 and 1/2 -year lease with PH Corp. Payments of $10,000 on the lease are made at the end of the year for years 1,2 and 3 and ($5,000 in the last period; year 4.) There are no provisions for a bargain purchase or an extension of the lease term. The asset has a fair value of $35,000 and has a useful economic life of 4 years.
Corp. X is rated as a BBB rated company by Moody’s Investors-a rating company.
Additional Facts
1-BBB Market Interest rates:
Date of issue on 12/31/2019
Year 1 2% 1.5%
Year 2 2.5% 2.0%
Year 3 2.75% 2.5%
Year 4 3,5% 3.0%
Year 5 4.0%. 4.0%
BTW There is no correct answer
Question 7
1-Calculate the market interest rate at date of issue?
2-Calculate the price of the bond at the date of issue?
3-What is the interest expense in Year 1.
4-What is the Balance Sheet value of Bonds payable on 12/31/19? Please provide 2 answers.
In: Accounting
Blue Computing Company purchased some property, plant and equipment (PPE) on January 1, Year 1. The PPE cost $5,000,000 and has an estimated salvage value of $100,000. The useful life is 5 years. The units produced by the PPE will be: Year 1, 50,000 units; Year 2, 100,000 units; Year 3, 100,000 units; Year 4, 75,000 units; Year 5, 25,000 units. Please answer the following questions about this PPE.
In: Accounting
On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and also signed a 3 and 1/2 -year lease with PH Corp. Payments of $10,000 on the lease are made at the end of the year for years 1,2 and 3 and ($5,000 in the last period; year 4.) There are no provisions for a bargain purchase or an extension of the lease term. The asset has a fair value of $35,000 and has a useful economic life of 4 years.
Corp. X is rated as a BBB rated company by Moody’s Investors-a rating company.
Additional Facts
1-BBB Market Interest rates:
Date of issue on 12/31/2019
Year 1 2% 1.5%
Year 2 2.5% 2.0%
Year 3 2.75% 2.5%
Year 4 3,5% 3.0%
Year 5 4.0%. 4.0%
BTW There is no correct answer
Question 7
1-Calculate the market interest rate at date of issue?
2-Calculate the price of the bond at the date of issue?
3-What is the interest expense in Year 1.
4-What is the Balance Sheet value of Bonds payable on 12/31/19? Please provide 2 answers.
In: Finance
A Belgium subsidiary's beginning and ending trial balances appear below:
|
Dr (Cr) |
|
January 1 |
December 31 |
|
|
Cash, receivables |
€ 1,500 |
€ 1,200 |
|
Inventories |
3,000 |
3,500 |
|
Plant & equipment, net |
30,000 |
39,000 |
|
Liabilities |
(18,500) |
(27,200) |
|
Capital stock |
(4,000) |
(4,000) |
|
Retained earnings, beginning |
(12,000) |
(12,000) |
|
Sales revenue |
-- |
(15,000) |
|
Cost of sales |
9,500 |
|
|
Out-of-pocket selling & administrative expenses |
-- |
4,000 |
|
Depreciation expense |
-- |
1,000 |
|
Total |
€ 0 |
€ 0 |
Exchange rates ($/€) are:
|
Beginning of year |
$1.25 |
|
Average for year |
1.22 |
|
End of year |
1.20 |
The subsidiary was acquired at the beginning of the year. Its
sales, inventory purchases, and out-of-pocket selling and
administrative expenses occurred evenly during the year. Equipment
was purchased for €10,000 when the exchange rate was $1.23.
Depreciation for the year includes €200 related to the equipment
purchased during the year. The ending inventory was purchased at
the end of the year, and the beginning inventory was purchased at
the end of the previous year.
If the subsidiary's functional currency is the euro, what
is the translation gain or loss for the year?
Select one:
A. $2,020 loss
B. $1,030 gain
C. $1,130 gain
D. $ 810 loss
In: Accounting
O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 27 |
| Direct labor | $ | 18 |
| Variable manufacturing overhead | $ | 3 |
| Variable selling and administrative | $ | 1 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 540,000 |
| Fixed selling and administrative expenses | $ | 190,000 |
During its first year of operations, O’Brien produced 99,000 units and sold 76,000 units. During its second year of operations, it produced 81,000 units and sold 99,000 units. In its third year, O’Brien produced 84,000 units and sold 79,000 units. The selling price of the company’s product is $71 per unit.
Required:
1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, and Year 3.
b. Prepare an income statement for Year 1, Year 2, and Year 3.
In: Accounting
O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 27 |
| Direct labor | $ | 17 |
| Variable manufacturing overhead | $ | 5 |
| Variable selling and administrative | $ | 3 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 580,000 |
| Fixed selling and administrative expenses | $ | 190,000 |
During its first year of operations, O’Brien produced 91,000 units and sold 71,000 units. During its second year of operations, it produced 76,000 units and sold 91,000 units. In its third year, O’Brien produced 82,000 units and sold 77,000 units. The selling price of the company’s product is $77 per unit.
2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, and Year 3.
b. Prepare an income statement for Year 1, Year 2, and Year 3.
In: Accounting
|
Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset falls into the 3-year MACRS class (MACRS schedule). The project is estimated to generate $1,730,000 in annual sales, with costs of $636,000. The project requires an initial investment in net working capital of $290,000, and the fixed asset will have a market value of $240,000 at the end of the project. |
| a. | If the tax rate is 24 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.) |
| b. | If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.) |
a. Year 0 cash flow____
Year 1 cash flow ____
Year 2 cash flow ____
Year 3 cash flow ____
b. NPV ______
In: Finance