French Corporation wishes to hire Leslie as a consultant to design a comprehensive staff training program. The project is expected to take one year, and the parties have agreed to a tentative price of $72,500. French Corporation has proposed payment of one-half of the fee now, with the remainder paid in one year when the project is complete. Use Appendix A and Appendix B
. If Leslie expects her marginal tax rate to be 20 percent this year and 30 percent next year, calculate the after-tax net present value of this contract to Leslie, using a 6 percent discount rate.
b. French Corporation expects its marginal tax rate to be 26 percent both years. Calculate the net present value of French’s after-tax cost to enter into this contract using a 6 percent discount rate.
c-1. Given that Leslie expects her tax rate to increase next year, she would prefer to receive more of the income from the project up front. Consider an alternative proposal under which French pays Leslie $51,000 this year, and $20,000 in one year when the contract is complete. Calculate the after-tax benefit of this counterproposal to Leslie and the after-tax cost to French.
c-2. Are both parties better off under this alternative than under the original plan?
Given that Leslie expects her tax rate to increase next year, she would prefer to receive more of the income from the project up front. Consider an alternative proposal under which French pays Leslie $51,000 this year, and $20,000 in one year when the contract is complete. Calculate the after-tax benefit of this counterproposal to Leslie and the after-tax cost to French.
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In: Accounting
1. Fariq purchases and places in service in 2017 personal property costing? $2,051,000. The property does not qualify for bonus depreciation. What is the maximum Sec. 179 deduction that Fariq can? deduct, ignoring any taxable income? limitation?
A. $479,000
B. ?$510,000
C. $0
D. ?$489,000
2. Chahana acquired and placed in service? $665,000 of equipment on August? 1, 2017 for use in her sole proprietorship. The equipment is 5?year recovery property. No other acquisitions are made during the year. Chahana elects to expense the maximum amount under Sec. 179. Assuming the property does not qualify for bonus?depreciation, Chahana's total deductions for the year? (including Sec. 179 and? depreciation) are
A. ?$643,000.
B. $510,000.
C. $133,000.
D. ?$541,000.
3. Terra? Corporation, a calendar?year taxpayer, purchases and places into service machinery with a 7?year life that costs? $650,000. Neither the mid?quarter convention, nor bonus depreciation apply. Terra elects to depreciate the maximum under Sec. 179.? Terra's taxable income for the year before the Sec. 179 deduction is?$700,000. What is? Terra's total depreciation deduction related to this property? (rounded to the nearest? dollar)?
A. $650,000
B. ?$92,885
C. ?$530,006
D. ?$602,885
4. This year Bauer Corporation incurs the following costs in development of new? products:
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Laboratory supplies |
?$ 55,000 |
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Laboratory equipment purchased ????(5minus?year recovery? property) |
?50,000 |
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Salaries? (lab personnel) |
?90,000 |
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Utilities |
? 20,000 |
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Total |
?$215,000 |
No benefits are realized from the research expenditures until next year. If Bauer Corporation elects to expense the research? expenditures, the deduction is
A. ?$10,000 this year and? $175,000 next year.
B. ?$175,000 next year.
C. ?$175,000 this year.
D. ?$215,000 this year.
5. Ilene owns an unincorporated manufacturing business. In? 2017, she purchases and places in service? $2,036,000 of qualifying five?year equipment for use in her business. The property does not qualify for bonus depreciation. Her taxable income from the business before any Sec. 179 deduction is? $400,000. Ilene takes the maximum allowable deduction under section 179. Which of the following statements is true regarding the Sec. 179? election?
A. Ilene can deduct? $510,000 as a Sec. 179 deduction in? 2017, with no carryover to next year.
B. IIene can deduct? $400,000 as a Sec. 179 deduction in? 2017; $104,000 may be carried over to next year.
C. Ilene can deduct? $400,000 as a Sec. 179 deduction in 2017? ,with no carryover to next year.
D. Ilene can deduct? $504,000 as a Sec. 179 deduction in? 2017, with a? $6,000 carryover to next year.
In: Accounting
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2. |
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Change all of the numbers in the data area of your worksheet so that it looks like this:
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If your formulas are correct, you should get the correct answers to the following questions. |
| (a) |
What is the net operating income (loss) in Year 1 under absorption costing? |
| (b) |
What is the net operating income (loss) in Year 2 under absorption costing? |
| (c) |
What is the net operating income (loss) in Year 1 under variable costing? |
| (d) |
What is the net operating income (loss) in Year 2 under variable costing? |
| (e) |
The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because (Select all that apply.): |
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( ) units were left over from the previous year ( ) The cost of goods sold is always less under variable costing than absorbtion costing ( ) Sales exceeded production so some of the fixed manufacturing overhead of the period was released from inventories under absorption costing |
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| 3. | |
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Make a note of the absorption costing net operating income (loss) in Year 2. |
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At the end of Year 1, the company’s board of directors set a target for Year 2 of net operating income of $150,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 5,200 units. |
| (a) |
Would this change result in a bonus being paid to the CEO? |
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| (b) |
What is the net operating income (loss) in Year 2 under absorption costing? |
| (c) |
Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,800 units per year? |
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In: Accounting
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2. |
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Change all of the numbers in the data area of your worksheet so that it looks like this:
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If your formulas are correct, you should get the correct answers to the following questions. |
| (a) |
What is the net operating income (loss) in Year 1 under absorption costing? |
| (b) |
What is the net operating income (loss) in Year 2 under absorption costing? |
| (c) |
What is the net operating income (loss) in Year 1 under variable costing? |
| (d) |
What is the net operating income (loss) in Year 2 under variable costing? |
| (e) |
The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because (Select all that apply.): |
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( ) units were left over from the previous year ( ) The cost of goods sold is always less under variable costing than absorbtion costing ( ) Sales exceeded production so some of the fixed manufacturing overhead of the period was released from inventories under absorption costing |
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| 3. | |
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Make a note of the absorption costing net operating income (loss) in Year 2. |
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At the end of Year 1, the company’s board of directors set a target for Year 2 of net operating income of $150,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 5,200 units. |
| (a) |
Would this change result in a bonus being paid to the CEO? |
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| (b) |
What is the net operating income (loss) in Year 2 under absorption costing? |
| (c) |
Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,800 units per year? |
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In: Accounting
You have been asked to calculate the Return on Investment (ROI) for a project whose development will be accomplished during a single calendar year with the go-live date of Jan 1st The project, to develop a new Web-based ordering and fulfillment system, has already been conceptualized, and the team has provided estimates and a partial resource plan. Labor Operating expenses in years 2 through 5 are projected to be $57,000 annually. Miscellaneous expenses in years 2 through 5 are projected to be $6,500 annually. The benefit is projected to be $225,000 the first year of operation, increasing 11% each year. Hardware cost that would be installed for development is $100,000. You’ll need to complete the resource plan, the 5 year planning sheet, and calculate a 5 year ROI. Please finish filling out these tables and answer the associated questions.
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Development Team |
Quantity |
$/hour |
Hours/each resource |
Total Hours |
Total Dollars |
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Program Director |
1 |
95 |
500 |
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Project Manager |
1 |
95 |
1000 |
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BA |
1 |
95 |
750 |
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Development Lead |
1 |
80 |
1000 |
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QA Lead |
1 |
80 |
1000 |
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Off-Shore Developers |
6 |
25 |
750 |
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Off-Shore QA |
4 |
25 |
750 |
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Total |
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Expense |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
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Labor |
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Hardware |
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Misc |
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Benefit |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
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Benefit |
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Question 1 [2 points]: What is the total labor cost of development?
Question 2 [2 points]: What is the total expense of this project projected to be for the first 5 year period?
Question 3 [2 points]: What is the total benefit projected to be for the first year?
Question 4 [2 points]: What is the total benefit projected to be for the first five years?
Question 5 [2 points]: Given ROI % = ((Benefit – Cost) / Cost)*100, what is the 5 year ROI for this project?
Question 6 [2 points]: If the company could just put the money to cover the project expenses in the bank (instead of doing this project) it could make a investment gain of 7% over this same 5 year period. Should the company invest in this project, or put the money in the bank? Why?
Question 7 [4 points]: Describe in your own words BRIEFLY why APO05 and APO06 are important to project funding selection based on ROI calculation.
In: Operations Management
This is all one question with several parts for my accounting homework. I've tried but I keep getting the wrong answer please help.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 if your formulas are correct, you should get the correct answers to the following questions. (a) What is the net operating income (loss) in Year 1 under absorption costing?(b) What is the net operating income (loss) in Year 2 under absorption costing? (c) What is the net operating income (loss) in Year 1 under variable costing? (d) What is the net
operating income (loss) in Year 2 under variable costing? (e) The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because:
Make a note of the absorption costing net operating income (loss) in Year 2. At the end of Year 1, the company’s board of directors set a target for Year 2 of net operating income of $40,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 3,800 units. (a) Would this change result in a bonus being paid to the CEO?
(b) What is the net operating income (loss) in Year 2 under absorption costing (c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,100 units per year?
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In: Accounting
When doing your calculations, round to the nearest whole dollar amount AND the nearest whole number of shares, Enter your answers in whole dollar amounts, without '$' signs and without commas.
This fact pattern spans three years. All eight requirements are based on this fact pattern. However, #1 only asks the balance in the Common Stock account at the end of Year 2.
●Issuance of Shares: Company issued 6,000 common shares with a $10 per share par value for $95,000 cash early in Year 1. At the same time the firm issued 500 shares of its $50 par value 8% preferred stock for $35,000 cash. The preferred shares are participating and cumulative. In Year 1, Company had Net Income of $70,000.
●On January 1, Year 2, the firm issued a 30% common stock dividend when the shares had a fair market value of $25 per share. No cash dividends were paid in Year 2. During Year 2, the firm had Net Income of $75,000.
When doing your calculations, round to the nearest whole dollar amount. When entering your answers, round to the nearest whole dollar amount, do not use '$' signs OR commas.
#1: Common Stock balance at the end of Year 2: ______________
The other requirements are shown here for your convenience in responding to all the requirements in this quiz.
#2: Retained Earnings balance at the end of Year 2: _____________
●Early in Year 3, Company distributed a 10% common stock dividend when the fair market value of the common shares was $28 each. Net Income in Year 3 was $80,000. The firm declared and distributed a cash dividend in Dec. Year 3 in the amount of $29,000.
#3: Retained Earnings balance at Dec. 31, Year 3 _____________
#4: Cash paid to common shareholders in Year 3: _____________
#5: Balance in Common Stock account at Dec. 31, Yr 3: _____________
●On Jan. 1, Year 4, Company declared and distributed a 5% stock dividend when the fair market value of each common share was $40. Cash dividends declared and distributed late in Year 4 amounted to $38,000. Net Income for Year 4 was $85,000.
#6: Retained Earnings balance at Dec. 31, Year 4 $_____________
#7: Cash paid to preferred shareholders in Year 4: $_____________
#8: Balance in Common Stock account at Dec. 31, Yr. 4: $_____________
In: Accounting
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $21,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 4 percent on his investments. a. What is the after-tax income if Hank sends his client the bill in December? b. What is the after-tax income if Hank sends his client the bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.) c. Based on requirement a and b, should Hank send his client the bill in December or January? 4% 5% 6% 7% 8% 9% 10% 11% 12% Year 1 .962 .952 .943 .935 .926 .917 .909 .901 .893 Year 2 .925 .907 .890 .873 .857 .842 .826 .812 .797 Year 3 .889 .864 .840 .816 .794 .772 .751 .731 .712 Year 4 .855 .823 .792 .763 .735 .708 .683 .659 .636 Year 5 .822 .784 .747 .713 .681 .650 .621 .593 .567 Year 6 .790 .746 .705 .666 .630 .596 .564 .535 .507 Year 7 .760 .711 .665 . .623 .583 .547 .513 .482 .452 Year 8 .731 .677 .627 .582 .540 .502 .467 .434 .404 Year 9 .703 .645 .592 .544 .500 .460 .424 .391 .361 Year 10 .676 .614 .558 .508 .463 .422 .386 .352 .322 Year 11 .650 .585 .527 .475 .429 .388 .350 .317 .287 Year 12 .625 .557 .497 .444 .397 .356 .319 .286 .257 Year 13 .601 .530 .469 .415 .368 .326 .290 .258 .229 Year 14 .577 .505 .442 .388 .340 .299 .263 .232 .205 Year 15 .555 .481 .417 .362 .315 .275 .239 .209 .183
In: Accounting
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1. Change all of the numbers in the data area of your worksheet so that it looks like this:
If your formulas are correct, you should get the correct answers to the following questions. (a) What is the net operating income (loss) in Year 1 under absorption costing?(b) What is the net operating income (loss) in Year 2 under absorption costing? (c) What is the net operating income (loss) in Year 1 under variable costing? (d) What is the net operating income (loss) in Year 2 under variable costing? (e) The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because (You may select more than one answer.)
3. Make a note of the absorption costing net operating income (loss) in Year 2. At the end of Year 1, the company’s board of directors set a target for Year 2 of the net operating income of $70,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 5,400 units. (a) Would this change result in a bonus being paid to the CEO? Yes or No?(b) What is the net operating income (loss) in Year 2 under absorption costing? (c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,900 units per year? yes or no? |
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In: Accounting
1)Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.73 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,090,000 in annual sales, with costs of $783,000. The project requires an initial investment in net working capital of $310,000, and the fixed asset will have a market value of $215,000 at the end of the project. a. If the tax rate is 21 percent, what is the project’s Year 1 net cash flow? Year 2? Year 3? Table 8.3. (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 2 decimal places, e.g., 1,234,567.89.) b. If the required return is 13 percent, what is the project's NPV? (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 1,234,567.89.)
Year 0 Cash Flow:
Year 1 Cash Flow:
Year 2 Cash Flow:
Year 3 Cash Flow:
NVP:
2)
| Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.61 million. The fixed asset qualifies for 100 percent bonus depreciation. The project is estimated to generate $2,050,000 in annual sales, with costs of $751,000. The project requires an initial investment in net working capital of $270,000, and the fixed asset will have a market value of $275,000 at the end of the project. |
| a. | If the tax rate is 23 percent, what is the project’s Year 1 net cash flow? 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 the nearest whole number, e.g., 1,234,567.) |
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b. If the required return is 15 percent, what is the project's NPV? (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 1,234,567.89.) Year 0 Cash Flow: Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow NPV |
In: Finance