A project requires to purchase an equipment with a cost of $1.55 million. The equipment will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project it will be sold for a market value of $240,000. The project will not change sales but will reduce operating costs by $399,000 per year. The project also requires an initial investment of $52,000 in net working capital, which will be recouped when the project ends. The tax rate is 34 percent. (1) What is the cash flow of the project in year 0 (or at the beginning of the project)? (2) What is the cash flow of the project in each year from year1 to year 8? (3) What is the cash flow of the project in year 9 (or the ending year)? [hint: there are 3 cash flow items, for example after-tax salvage value] (4) What is the project's NPV if the required return is 11.5 percent? [hint: the answer for NPV value is one of the following choices:] A. $215,433 B. $276,945 C. $268,011 D. $225,225 E. $257,703

The ABC Corp. is evaluating a proposal for a new project. It will cost RM55,000 to get the undertaking started. The project will then generate cash inflows of RM21,000 in its first year and RM17,000 per year in the next five years after which it will end. ABC uses an interest rate of 9% compounded annually for such evaluations. Calculate the “Net Present Value” (NPV) of the project by treating the initial cost as a cash outflow (a negative) in the present, and adding the present value of the subsequent cash inflows as positives

A variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset. Your client has just purchased a piece of equipment for $100,000.   Explain the concept of depreciation. Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method. Share with us if a company would use an accelerated depreciation method for their financial statements or their tax returns. Why do you believe this would be?

Consider a competitive firm.

a) Sketch the cost function as a function of the price of good 1, assuming that the production function is Leontiff.

b) Sketch the cost function as a function of the price of good 2, assuming the production function is linear in good 2.

People in the aerospace industry believe the cost of a space project is a function of the mass of the major object being sent into space. Use the following data to develop a regression model to predict the cost of a space project by the mass of the space object. Determine r² and s_e.

*(Do not round the intermediate values. Round your answers to 4 decimal places.)
**(Round the intermediate values to 4 decimal places. Round your answer to 3 decimal places.)


ŷ = enter a number rounded to 4 decimal places  * + enter a number rounded to 4 decimal places * x
r² = enter a number rounded to 3 decimal places  **
s_e = enter a number rounded to 3 decimal places  **

People in the aerospace industry believe the cost of a space project is a function of the mass of the major object being sent into space. Use the following data to develop a regression model to predict the cost of a space project by the mass of the space object. Determine r2 and se

Weight (Tons) cost (millions

1.897 $53.6

3.019 185.1

0.453 6.4

0.994 23.5   

1.058 34.1

2.100 110.4

2.402 104.6

ŷ = enter a number rounded to 4 decimal places  * + enter a number rounded to 4 decimal places * x
r² = enter a number rounded to 3 decimal places  **
s_e = enter a number rounded to 3 decimal places  **

In 1993, Novak Company completed the construction of a building at a cost of $2,500,000 and first occupied it in January 1994. It was estimated that the building will have a useful life of 40 years and a salvage value of $76,000 at the end of that time.

Early in 2004, an addition to the building was constructed at a cost of $625,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $25,000.

In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.

(a)

Correct answer iconYour answer is correct.

Using the straight-line method, compute the annual depreciation that would have been charged from 1994 through 2003.

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List of Accounts

Attempts: 1 of 3 used

(b)

• Your Answer
• Correct Answer

Compute the annual depreciation that would have been charged from 2004 through 2022.

(c)

Correct answer iconYour answer is correct.

Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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List of Accounts

Attempts: 1 of 3 used

(d)

Compute the annual depreciation to be charged, beginning with 2022. (Round answer to 0 decimal places, e.g. 45,892.)

?

It is stated in chapter 5 of Cornerstones of Cost Management that the theoretical and practical activity levels reflect, in general, the company's production capabilities, while the expected and normal activity levels reflect, in general, consumer demand. Please explain why these breakdowns are correct, including possible examples of what is being described by each of the activity levels.

Cost functions, a part of the definition of profit, are useful to gauge the performance of the business. Suppose an economist estimated that the cost function of a single-product firm as: C(Q) = 2 + 2Q + 2Q2 Based on this information, determine the followings and show all steps (first, you must define each of the terms in the cost function, and then plug in the numbers to have your answers; not just the answers): Hint: The use of Graphs is recommended. a. Define fixed cost and offer an example. Next, compute the fixed cost of producing 4 units of output using the cost function above. b. Define variable cost and offer an example. Next compute the variable cost of producing 4 units of output using the cost function above. c. Define total cost and then compute the total cost of producing 4 units of output using the cost function above d. Define and compute the average fixed cost of producing 10 units of output e. Define and compute the average variable cost of producing 10 units of output f. Define and compute the average total cost of producing 10 units of output g. Define marginal cost an offer an example. Next, compute the marginal cost when Q = 2, using the cost function above

Find the opportunity cost in moving from B to C.                                                     (1 mark)

2. The economy strives to shift from PP1 to PP2. Discuss ways in which the economy reach PP2.                                                                                                                                    

3. Assume that at A, the economy can produce 10 mops and 10 brooms. Is it economically efficient? Why?