In: Economics
"An oil and gas company is considering whether to begin drilling a new oil field. The company will need to pay $4.6 million as an initial investment in order to extract the oil. The company will operate the field for a total of 5 years, during which its annual profit will be $3,344,000. During the 6th year, the company will not operate or gain any revenue from the oil field, but it will need to pay $8,990,000 in environmental remediation costs to return the area to an acceptable state. What is the MAXIMUM interest rate for which this project is an acceptable investment? Enter the interest rate as a percentage. "
In: Finance
During the year, TRC Corporation has the following inventory transactions.
| Date | Transaction | Number of Units | Unit Cost | Total Cost | |||||||||
| Jan. | 1 | Beginning inventory | 49 | $ | 41 | $ | 2,009 | ||||||
| Apr. | 7 | Purchase | 129 | 43 | 5,547 | ||||||||
| Jul. | 16 | Purchase | 199 | 46 | 9,154 | ||||||||
| Oct. | 6 | Purchase | 109 | 47 | 5,123 | ||||||||
| 486 | $ | 21,833 | |||||||||||
For the entire year, the company sells 428 units of inventory for $59 each.
Required:
1. Using FIFO, calculate ending inventory, cost of goods sold, sales revenue, and gross profit.
In: Accounting
Beavis Construction Company was the low bidder on a construction
project to build an earthen dam for $1,820,000. The project was
begun in 2020 and completed in 2021. Cost and other data are
presented below:
| 2020 | 2021 | |||||
| Costs incurred during the year | $ | 518,000 | $ | 1,120,000 | ||
| Estimated costs to complete | 962,000 | 0 | ||||
| Billings during the year | 410,000 | 1,410,000 | ||||
| Cash collections during the year | 310,000 | 1,510,000 | ||||
Assume that Beavis recognizes revenue on this contract over time
according to percentage of completion.
Required:
Compute the amount of gross profit recognized during 2020 and
2021.
In: Accounting
A firm is considering purchasing a computer system. The
following data has been collected.
- Cost of the system: $172,000
- Project life: 6 years
- Salvage value at the end of year 6: $16,000
- Depreciation method: five-year MACRS
- Tax rate: 39%
- Annual revenue from project: $142,000
- Annual expenses (not including depreciation): $92,000
The firm will borrow the entire $172,000 at 5.8% interest to be
repaid in 2 annual payments.
The firm's MARR is 12%. Determine the IRR for the computer system.
Enter your answer as a percentage between 0 and 100."
In: Finance
1. Suppose the company White Cabs is the sole authorised operator of taxicabs in Fairville, a city of about two million people.
a) With the aid of a revenue-cost diagram, explain and illustrate the company's decisions with regard to output (how much service it provides) and price. What kind of market structure are you assuming here? Would you expect White Cabs to make super-normal (or above-normal, or economic) profit? Briefly explain the latter concept.
NOTE: Please explain the answer in detail. And the diagram should be very neat. Thank you!
In: Economics
7. Jeff, the manager of HiQ DVD and former president of the Guild of Graduates (UWI), seeks your expert advice. He has given you the following information: when he charged a price of $10, approximately 4,000 DVD were sold, however, when the price increased by 10% the demand decreased by 1,000 units (DVD). Jeff wants to know the following (based on operating cost of $7 per DVD):
a) What is the MR?
b) What price would maximize profit?
c) What impact would a price decrease have on revenue?
In: Economics
Do you think optimal hiring will give businesses economic profits?
Think about this week's topics. Explain your answers.
(CO C) Economies of Scale Reductions in the Average Total Cost (ATC) of producing a product as the firm expands the SIZE of plant (its output) in the long run; the Economies of Mass Production!
(CO C) Economic Profit The Total Revenue [TR] of a firm minus its Economic Costs (which include both “Explicit Costs and Implicit Costs”); also called "pure profit" and "above-normal profit."
In: Economics
A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is projected that the acquisition of this equipment will increase revenue by $10,000 per year. Operating costs for the machine will average $2,600 per year. The machine will be depreciated using the MACRS method, with a recovery period of 7 years. The company uses an after-tax MARR rate of 10% and has an effective tax rate of 30%.
2. Now, suppose that the duration of the project is six years and that an estimate of the value of the equipment cannot be obtained from the marketplace.
2.4. What is the tax on the disposal transaction?
In: Finance
"A firm is considering purchasing a computer system. The
following data has been collected.
- Cost of the system: $155,000
- Project life: 6 years
- Salvage value at the end of year 6: $22,000
- Depreciation method: five-year MACRS
- Tax rate: 40%
- Annual revenue from project: $130,000
- Annual expenses (not including depreciation): $93,000
The firm will borrow the entire $155,000 at 9% interest to be
repaid in 2 annual payments.
The firm's MARR is 19%. Determine the IRR for the computer system.
Enter your answer as a percentage between 0 and 100."
In: Finance