Company XYZ is considering investing in a new machine that will cost $15,000. The machine will allow the firm to generate sales of $50,000 per year. The machine will have a life of 3 years. The operating expenses of XYZ are projected to be 70% of total sales. The machine will be depreciated on a straight-line basis to a zero salvage value. The market value of the machine in three years is estimated to be $5,000. The marginal tax rate of the firm is 35%. If the discount rate is 20%, should the investment be undertaken?
In: Accounting
Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
A new operating system for an existing machine is expected to cost $640,000 and have a useful life of six years. The system yields an incremental after-tax income of $175,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $20,800. (Round your answers to the nearest whole dollar.)
|
|||||||||||||||||||||||||||||||||||||||||
A machine costs $550,000, has a $24,800 salvage value, is expected to last eight years, and will generate an after-tax income of $76,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)
|
|||||||||||||||||||||||||||||||||||||||||
In: Accounting
Personal Investment Analysis Find of the cost of a bachelor's degree at the university of your choice assume additional costs of $16,000 for an additional fifth year of education to get Master's degree. Assume that all tuition is paid at the beginning of the year. A student considering this investment must evaluate the present value of cash flows from possessing a graduate degree versus holding only the undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn an annual salary of $55,000 per year (assumed to be paid at the end of the year) for 10 years. Assume that the average student with a graduate Masters degree is expected to earn an annual salary of $76,000 per year (assumed to be paid at the end of the year) for nine years after graduation. Assume a minimum rate of return of 10%. Determine the net present value of cash flows from an undergraduate degree. Use the present value table provided in this chapter 26. Determine the net present value of cash flows from a Masters degree, assuming that no salary is earned during the graduate year of schooling. What is the net advantage or disadvantage of pursuing a graduate degree under these assumption?
In: Accounting
A special bumper was installed on selected vehicles in a large fleet. The dollar cost of body repairs was recorded for all vehicles that were involved in accidents over a 1-year period. Those with the special bumper are the test group and the other vehicles are the control group, shown below. Each "repair incident" is defined as an invoice (which might include more than one separate type of damage).
| Statistic | Test Group | Control Group | ||||||||
| Mean Damage | X¯¯¯1X¯1 | = | $ | 1,153 | X¯¯¯2X¯2 | = | $ | 1,751 | ||
| Sample Std. Dev. | s1 | = | $ | 663 | s2 | = | $ | 820 | ||
| Repair Incidents | n1 | = | 16 | n2 | = | 14 | ||||
Source: Unpublished study by Thomas W. Lauer and Floyd G.
Willoughby.
(a) Construct a 99 percent confidence interval for
the true difference of the means assuming equal variances.
(Round your final answers to 3 decimal
places. Negative values should be indicated by a
minus sign.)
The 99% confidence interval is from ________ to ______.
(b) Repeat part (a), using the assumption of
unequal variances with Welch's formula for d.f.
(Round the calculation for Welch's df to the nearest
integer. Round your final answers to 3 decimal places. Negative
values should be indicated by a minus sign.)
The 99% confidence interval is from ______ to _______.
(c) Did the assumption about variances change the
conclusion? Yes? No?
(d) Construct separate 99% confidence intervals for each mean. (Round your intermediate tcrit value to 3 decimal places. Round your final answers to 2 decimal places.)
| Mean Damage | Confidence Interval |
| x¯1=$1,153x¯1=$1,153 | ($ _____ , $ ______ ) |
| x¯2=$1,751x¯2=$1,751 | ($ _____ , $ ______ ) |
In: Statistics and Probability
1.Equipment with a book value of $82,000 and an original cost of $161,000 was sold at a loss of $33,000. Paid $100,000 cash for a new truck. Sold land costing $310,000 for $405,000 cash, yielding a gain of $95,000. Long-term investments in stock were sold for $92,100 cash, yielding a gain of $14,000. Use the above information to determine cash flows from investing activities. (Amounts to be deducted should be indicated with a minus sign.)
2.
Use the above information to determine cash flows from financing
activities. (Amounts to be deducted should be indicated
with a minus sign.)
3.
| MONTGOMERY INC. Comparative Balance Sheets December 31 |
||||||||||||
| Current Year | Prior Year | |||||||||||
| Assets | ||||||||||||
| Cash | $ | 58,600 | $ | 59,000 | ||||||||
| Accounts receivable, net | 17,300 | 21,200 | ||||||||||
| Inventory | 155,100 | 122,500 | ||||||||||
| Total current assets | 231,000 | 202,700 | ||||||||||
| Equipment | 85,900 | 72,500 | ||||||||||
| Accum. depreciation—Equipment | (38,900 | ) | (26,800 | ) | ||||||||
| Total assets | $ | 278,000 | $ | 248,400 | ||||||||
| Liabilities and Equity | ||||||||||||
| Accounts payable | $ | 41,400 | $ | 44,500 | ||||||||
| Salaries payable | 800 | 1,000 | ||||||||||
| Total current liabilities | 42,200 | 45,500 | ||||||||||
| Equity | ||||||||||||
| Common stock, no par value | 196,200 | 181,100 | ||||||||||
| Retained earnings | 39,600 | 21,800 | ||||||||||
| Total liabilities and equity | $ | 278,000 | $ | 248,400 | ||||||||
| MONTGOMERY INC. Income Statement For Current Year Ended December 31 |
|||||||
| Sales | $ | 76,600 | |||||
| Cost of goods sold | (31,800 | ) | |||||
| Gross profit | 44,800 | ||||||
| Operating expenses | |||||||
| Depreciation expense | $ | 12,100 | |||||
| Other expenses | 9,300 | ||||||
| Total operating expense | 21,400 | ||||||
| Income before taxes | 23,400 | ||||||
| Income tax expense | 5,600 | ||||||
| Net income | $ | 17,800 | |||||
Additional Information on Current-Year
Transactions
1. Use the above information to prepare a
statement of cash flows for the current year using the indirect
method. (Amounts to be deducted should be indicated by
a minus sign.)
In: Accounting
The cost of equipment purchased by Blossom, Inc., on June 1, 2020, is $105,000. It is estimated that the machine will have a $4,200 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 50,400, and its total production is estimated at 504,000 units. During 2020, the machine was operated 7,440 hours and produced 68,200 units. During 2021, the machine was operated 6,820 hours and produced 59,520 units.
Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021, using the following methods. (Round depreciation per unit to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 45,892.)
2020
2021
(a) Straight-line
$
$
(b) Units-of-output
$
$
(c) Working hours
$
$
(d)
Sum-of-the-years'-digits
$
$
(e) Double-declining-balance (twice
the straight-line rate)
$
$
In: Accounting
In: Accounting
An investment is made for $30,000. If you want to recover the cost in 2 years, what should the realized income be in every 6 months at an interest rate of 12% per year compounded quarterly?
Answer should be: 8675.59
In: Economics
A company sells its product subject to a warranty that covers the cost of parts and labour for repair during the six months after sale. The warranty costs are estimated to be 3.5% of sales for parts, and 1.5% of sales for labour. During the month of June, the company performed warranty work and used $8,000 worth of parts and paid $4,000 in wages for labour to do the warranty work. Sales for June amounted to $450,000.
Required
1. Prepare the journal entries:
- an estimation of the warranty
- a year-end entry for the warranty
2. If the Estimated Warranty Liability account had a $10,000 credit balance on May 31, calculate the account balance as of June 30?
In: Accounting
Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Part B
A machine costs $380,000, has a $33,800 salvage value, is expected to last eight years, and will generate an after-tax income of $66,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)
In: Accounting