The Casper Ice Cream Company is an ice cream manufacturer in Richmond, Utah famous for making Fat Boy Ice Cream Sandwiches. The owner, Mr. Casper, the grandson of the founder, is considering replacing an existing ice cream maker and batch freezer with a new maker which has a greater output capacity and operates with less labor. His only alternative is to overhaul his ice cream maker and batch freezer which have a current net book value of $6,000 and three years of remaining depreciable life (straight line). The equipment would cost $10,000 to overhaul but this would increase its useful life for 10 years which is also the life of the new machinery. Mr. Casper’s accountant tells him the new net book value of the overhauled equipment could be depreciated straight line over four years. The old machinery has zero salvage value currently.

The new maker and freezer would cost $50,000 including installation. It would be fully depreciated over 10 years and would have $3,000 salvage at the end of that period. Because of automatic features, the new equipment would allow labor saving of $9,000 per year.

Even though the new equipment has increase capacity, Mr. Casper does not feel any extra product could be sold until year five. At that time, he estimates that additional sales would result in additional net cash revenues before tax of $5,000 per year for the remaining life of the machine. By the end of year four, however, working capital would have to be increased by $3,000 to support the higher sales. This increase in working capital will be recovered at the end of the project, which will last for 10 years.   

Casper Company is currently in the 30% tax bracket. Mr. Casper demands a rate of return of 16%.   

Complete a NPV and IRR analysis on the project.

The cash flow statement below is extracted from a company.

Required:

Using your own words, discuss the following relationships

a) between net income, working capital from operations, and cash flow from operations for the three years, and

b) between cash flows from operating, investing, and financing activities for the three years.

On December 31, 2020, Iva Majoli Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-bearing note. The note was issued to yield 10% interest. Unfortunately, during 2022, Majoli began to experience financial difficulty. As a result, at December 31, 2022, Paris Bank determined that it was probable that it would receive back only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%.

1.Instructions: Complete the note amortization table.

2. Instructions: Journalize the transactions for the note origination and interest recognition for the first 2 years.

3. Recalculate the carrying value of the note pursuant to the events that occurred on December 31, 2022.

4. Instructions: Prepare the journal entry to record the note impairment.

Instructions: Provide the net realizable presentation of the notes receivable as it would appear on the December 31, 2022 balance sheet.

WACC

Assume it is January 1, 2020.  Zelus Sport Shoe Company has three debt issues outstanding.

6.5% Notes December 31, 2028 ($200 million face value) Market price $980.05.

7.0% Bonds, maturing December 31, 2030 ($100 million face value) Market price $984.98.

7.5% Bonds, maturing December 31, 2036 ($200 million face value) Market price $1,029.15.

All bonds have a $1,000 face value and pay interest semi-annually.

Use a 5.0% risk-free rate and a 7.0% market risk premium to compute Zelus’s cost of equity.  The table shows the weekly closing prices for Zelus and the S&P 500 Index.  Last week Zelus’s stock closed at $99.75 per share.  There are 16 million shares of common stock outstanding.

The company also has 8 million shares of preferred stock outstanding.  The preferred stock pays an annual $5.00 dividend and current sells for $50 per share.  The tax rate is 30%.

Assume you are doing the WACC calculation on January 1, 2020, and that the semi-annual interest payments of the notes and bonds were paid on December 31, 2019.  Show your beta and the costs and weights of all of the WACC components in the table provided.  Show costs to 3 decimal places.

Beta (3 decimal places) = __________

If the FLN is uniquely human, and was acquired through adaptive evolution, what “faculty” might it have evolved from? What aspect of the nonhuman prime mind is homologous to the FLN?

which is considered characteristic of the acquired of the immunological system?

a. specificity

b. memory

c. recognition of self (self-preservation)

d. inducible

e. all of the above are true

The following expenditures relating to plant assets were made by Prather Company during the first 2 months of 2017.

1. Paid $5,000 of accrued taxes at time plant site was acquired.

2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit.

3. Paid $850 sales taxes on new delivery truck.

4. Paid $17,500 for parking lots and driveways on new plant site.

5. Paid $250 to have company name and advertising slogan painted on new delivery truck.

6. Paid $8,000 for installation of new factory machinery.

7. Paid $900 for one-year accident insurance policy on new delivery truck.

8. Paid $75 motor vehicle license fee on the new truck.

Instructions

(a) Explain the application of the historical cost principle in determining the acquisition cost of plant assets.

(b) List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited.