PlasticWorks Corporation bought a machine at the beginning of the year at a cost of $15,500. The estimated useful life was five years, and the residual value was $2,500. Assume that the estimated productive life of the machine is 13,000 units. Expected annual production was: year 1, 4,000 units; year 2, 4,000 units; year 3, 2,500 units; year 4, 1,300 units; and year 5, 1,200 units.

Required:
1. Complete a depreciation schedule for each of the alternative methods. (Enter all values as positive amount.)

a. Straight-line.

b. Units-of-production.

c. Double-declining-balance.

2-a. Which method will result in the highest net income in year 2?

• Straight-line

• Units-of-production

• Double-declining-balance

2-b. Does this higher net income mean the machine was used more efficiently under this depreciation method?

• Yes

• No

An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume. Consider the following sample of production volumes and total cost data for a manufacturing operation.

1. Compute b₁ and b₀ (to 1 decimal).
   b₁  
   b₀  
   
   Complete the estimated regression equation (to 1 decimal).
   =  +  x
   
2. What is the variable cost per unit produced (to 1 decimal)?
   $
   
3. Compute the coefficient of determination (to 3 decimals). Note: report r² between 0 and 1.
   r² =  
   
   What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)?
   %
   
4. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?
   $

A company is considering an investment that will cost $743,000 and have a useful life of 8 years. The cash flows from the project are expected to be $410,000 per year in the first two years then $142,000 per year for the last 6 years. If the appropriate discount rate is 12.7 percent per annum, what is the NPV of this investment (to the nearest dollar)?

Select one:

a. $394283

b. $1880283

c. $384492

d. $516026

An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume.

In the Microsoft Excel Online file below you will find a sample of production volumes and total cost data for a manufacturing operation. Conduct a regression analysis to explore the relationship between total cost and production volume and then answer the questions that follow.

Open spreadsheet

1. Compute b₁ and b₀ (to 1 decimal).

   b₁

   b₀

   Complete the estimated regression equation (to 1 decimal).

   =  + x

2. According to this model, what is the change in cost (in dollars) for every unit produced (to 1 decimal)?

3. Compute the coefficient of determination (to 3 decimals). Note: report r² between 0 and 1.

   r² =

   What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)?

   %

4. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?

   $

An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume.

In the Microsoft Excel Online file below you will find a sample of production volumes and total cost data for a manufacturing operation. Conduct a regression analysis to explore the relationship between total cost and production volume and then answer the questions that follow.

Open spreadsheet

1. Compute b₁ and b₀ (to 1 decimal).

   b₁

   b₀

   Complete the estimated regression equation (to 1 decimal).

   =  + x

2. According to this model, what is the change in cost (in dollars) for every unit produced (to 1 decimal)?

3. Compute the coefficient of determination (to 3 decimals). Note: report r² between 0 and 1.

   r² =

   What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)?

   %

4. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number

A contractor is interested in the total cost of a project for which he intends to bid. He estimates that materials will cost P25000 and that his labour will cost P900 per day. The contractor then formulates the probability distribution for completion time (X), in days, as given in the following table. Completion time in days (X) 10 11 12 13 14 P(X=x) 0.1 0.3 0.3 0.2 0.1 a) Determine the total cost function C for the project. b) Find the mean and variance for completion time X. c) Find the mean, variance and standard deviation for the total cost C.

A company is planning to start an investment, which will cost an initial investment of $ 15 million. The management has already forecasted all future cash flows from this project: $4 million each year, for the next 6 years. Then the investment (machinery etc) will be sold for a price of $3 million. Calculate the MIRR, knowing that recovered funds will be reinvested at a rate of 12% annual nominal, compounded annually. For the external financing rate, the company uses the MARR. The MARR is 11% annual nominal, compounded annually. Should the company accept this investment or not ?

Builtrite has estimated their cost of capital is 14% and they are considering the purchase of a machine with the following capital budget:

What is the machine’s IRR?    
           
         

Consider a project with a cost of $1000, with the following expected cash inflows, and a WACC of 16%.

YEAR 1 $300--Year 2 $400- year 3 $300- Year 4 $500

Show your calculations by way of formulas, numerical values and if you like also by EXCEL for the following.

A. Calculate the present value of cash inflows.

B. Calculate the net present value of cash inflows.

C. Calculate the internal rate of return IRR.

D. Calculate the modified internal rate of return MIRR.

E. You will notice that IRR and MIRR are different in numerical values. Explain (in 5 lines) as to why they are different.

F. If you have to make a decision solely based on IRR or MIRR, which one would you choose and why? Explain in 5 lines.

Make sure you include your calculations by way of formulas, numerical values

Do we need to know the cost of equity to calculate the WACC?