Allergia Inc. has the following two mutually exclusive projects:

                      Year                  Cash Flow (A)                        Cash Flow (B)

0                      -$300,000                                -$35,000

1                      25,000                                     16,000

2                      60,000                                     12,000

3                      80,000                                     15,000

4                      120,000                                   13,000

Whichever project you choose, if any, you require a 15 percent return on your investment.

1. If you apply the payback criterion, which investment will you choose? Why?   

2. If you apply the NPV criterion, which investment will you choose? Why?         

3. If you apply the IRR criterion, which investment will you choose? Why?          

4. If you apply the profitability index criterion, which investment will you choose? Why?

5. f. Based on your answers in (a) through (e), which project will you finally choose? Why?

The initial capital cost will be $500,000 paid at the beginning of year 1 (i.e., immediately). The impact on cottage owners will involve a loss of $50,000 at the end of each year for the first four years (because of the construction activities affecting property values) but cottage owners will benefit by $55,000 per year in perpetuity from the end of year 5 onwards. The benefits from recreational fishing will not start until the end of year 5 and will be $35,000 per year in perpetuity. Development, stocking and management costs of the recreational fishery will start at the beginning of year 3 and continue forever. These costs are $10,000 per year

0. The province is considering a water resource development that will enhance recreational fishing and recreational cottage values (property values).

   1. a) Calculate the net present value using a 5% discount rate. Interpret the result. (15 points)

   2. b) Calculate the gross benefit cost ratio using a discount rate of 5%. Interpret the result. (5 points)

   3. c) Which value best approximates the internal rate of return: 4 %, 5%, 6%, 7%, 8%, or 9%? (Note – you are not being asked to calculate the internal rate of return!) (5 points)

A standardized​ exam's scores are normally distributed. In a recent​ year, the mean test score was 1507 and the standard deviation was 315. The test scores of four students selected at random are 1900​, 1260​, 2220​, and 1390. Find the​ z-scores that correspond to each value and determine whether any of the values are unusual. The​ z-score for 1900 is nothing. ​(Round to two decimal places as​ needed.) The​ z-score for 1260 is nothing. ​(Round to two decimal places as​ needed.) The​ z-score for 2220 is nothing. ​(Round to two decimal places as​ needed.) The​ z-score for 1390 is nothing. ​(Round to two decimal places as​ needed.) Which​ values, if​ any, are​ unusual? Select the correct choice below​ and, if​ necessary, fill in the answer box within your choice. A. The unusual​ value(s) is/are nothing. ​(Use a comma to separate answers as​ needed.) B. None of the values are unusual.

EcoSacks manufactures cloth shopping bags. The controller is preparing a budget for the coming year and asks for your assistance. The following costs and other data apply to bag production:

You learn that equipment costs and building occupancy are fixed and are based on a normal production of 650,000 units per year. Other overhead costs are variable. Plant capacity is sufficient to produce 850,000 units per year.

Labor costs per hour are not expected to change during the year. However, the cotton supplier has informed EcoSacks that it will impose a 20 percent price increase at the start of the coming budget period. No other costs are expected to change.

During the coming budget period, EcoSacks expects to sell 590,000 bags. Finished goods inventory is targeted to increase from the current balance of 170,000 units to 260,000 units to prepare for an expected sales increase the year after next as a result of legislation in several states regarding plastic bags. Production will occur evenly throughout the year. Inventory levels for cotton and canvas are expected to remain unchanged throughout the year. There is no work-in-process inventory.

Required:

a. Prepare a production budget for the coming year.

b. Estimate the materials, labor, and overhead costs for the coming year.

Company projects the following sales for the first three months of the year: $15,800 in January; $12,200 in February; and $11,100 in March. The company expects 80%of the sales to be cash and the remainder on account. Sales on account are collected 50% in the month of the sale and 50% in the following month. The Accounts Receivable account has a zero balance on January 1. Round to the nearest dollar. Prepare a revised schedule of cash receipts if receipts from sales on account are 70%in the month of the sale, 20% in the month following the sale, and 10% in the second month following the sale. What is the balance in Accounts Receivable on March 31? (Leave unused and zero balance account cells blank, do not enter "0".)

Mr. Smith is a resident of the UK. Last year he sold an apartment in Germany. According to the DTC between UK and Germany income derived from immovable property is taxable in the Contracting State in which the property is situated (Article 6). Besides this, Article 13(1) of the same DTC provides that gains arising on the disposal of immovable property are taxable in the Contracting State in which the property is situated. Finally, Article 23 of the tax treaty regarding the exemption method provides as follows:

‘a) Income and property other than that referred to below in point (b) of this paragraph shall be exempt from the UK taxes referred to in Article 2(3)(b), where that income or property may be taxed in Germany under this convention.

b) Notwithstanding the provisions of points (a) and (b) of this paragraph, UK tax on the part of income which is taxable in UK under this convention may be calculated at the rate of tax corresponding to the total amount of taxable income in accordance with UK tax legislation’.

Due to the sale of the apartment, Mr. Smith acknowledged a loss of 500 000 EUR in his income tax return. He stressed that he did not have any income in Germany form which he could deduct the loss. However, in the UK he had capital gains from the sale of shares of 1.000 000 EUR. The UK Tax Agency did not allow him to deduct the losses, which he sustained on the sale of immovable property in Germany from the income charged to tax in the UK.

What are the arguments of each party to support their position?

Linda's salary is $43000 a year. As a part of it's incentive program the company decides to give her a raise of $2000 every year. What is the discounted value of her income for the next 11 years at j₁=6%? *do not round intermediate steps*

A certain homeowner's insurance bill is $1,200 this year. Insurance rates are expected to increase at a rate of 7% per year for the next 10 years. If interest is 10% the equivalent uniform annual insurance bill over the 11-year period (i.e.,on payment now and 10 future payments) is closest to....

a) $9,633

b) $1,572

c) $1,488

d) $6,000

e) $5,121

f) $4,736

g) $1,494

h) $9,112

I) $1,818

j) $2,033

k) $1,616

The price of a car you are interested in buying is $93.45k. You negotiate a 6-year loan, with no money down and no monthly payments during the first year. After the first year, you will pay $1.23k per month for the following 5 years, with a balloon payment at the end to cover the remaining principal on the loan. The annual percentage rate (APR) on the loan with monthly compounding is 5%. What will be the amount of the balloon payment 6 years from now?

Note: The term “k” is used to represent thousands (× $1,000).

Required: Suppose the loan has initially been paid in full (without a balance due at maturity), the amount would have totaled $37k. Calculate the absolute percentage difference between the fully amortized loan and the balloon payment.

What is the value today of $1,800 per year, at a discount rate of 8 percent, if the first payment is received 4 years from now and the last payment is received 25 years from today?