A company is considering an 8-year project to expand into a new
geographical area. The project requires a new machine, which would
cost $230,000 FOB San Francisco, with a shipping cost of $8,000 to
the new plant location. Installation expenses of $13,000 would also
be required. This new machine would be classified as 7-year
property for MACRS depreciation purposes. The project engineers
anticipate that this equipment could be sold for salvage for
$40,000 at the end of theproject. If the corporate tax rate is 31%,
what is the after tax salvage cash flow for this new machine at the
end of the project? (Answer to the nearest dollar.)
MACRS percentages for depreciation each year are as follows:
Year %
1 14.29 2 24.49 3 17.49 4 12.49 5 8.93 6 8.93 7 8.93 8 4.45
In: Finance
The Eldorado Corporation's controller prepares adjusting entries only at the end of the fiscal year. The following adjusting entries were prepared on December 31, 2016: Debit Credit Interest expense 7,200 Interest payable 7,200 Rent expense 35,000 Prepaid rent 35,000 Interest receivable 500 Interest revenue 500 Additional information: The company borrowed $120,000 on March 31, 2016. Principal and interest are due on March 31, 2017. This note is the company's only interest-bearing debt. Rent for the year on the company's office space is $60,000. The rent is paid in advance. On October 31, 2016, Eldorado lent money to a customer. The customer signed a note with principal and interest at 6% due in one year. Required: Determine the following: What is the interest rate on the company's note payable? The 2016 rent payment was made at the beginning of which month? How much did Eldorado lend its customer on October 31?
In: Accounting
Herman Co. is considering a four-year project that will require an initial investment of $7,000. The base-case cash flows for this project are projected to be $14,000 per year. The best-case cash flows are projected to be $26,000 per year, and the worst-case cash flows are projected to be –$4,500 per year. The company’s analysts have estimated that there is a 50% probability that the project will generate the base-case cash flows. The analysts also think that there is a 25% probability of the project generating the best-case cash flows and a 25% probability of the project generating the worst-case cash flows.
What would be the expected net present value (NPV) of this project if the project’s cost of capital is 11%?
$26,684
$25,114
$29,823
$31,393
Herman now wants to take into account its ability to abandon the project at the end of year 2 if the project ends up generating the worst-case scenario cash flows. If it decides to abandon the project at the end of year 2, the company will receive a one-time net cash inflow of $4,750 (at the end of year 2). The $4,750 the company receives at the end of year 2 is the difference between the cash the company receives from selling off the project’s assets and the company’s –$4,500 cash outflow from operations. Additionally, if it abandons the project, the company will have no cash flows in years 3 and 4 of the project.
Using the information in the preceding problem, find the expected NPV of this project when taking the abandonment option into account.
$31,350
$34,833
$33,091
$38,316
What is the value of the option to abandon the project?
In: Finance
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $91 per unit, and variable expenses are $61 per unit. Fixed expenses are $836,400 per year. The present annual sales volume (at the $91 selling price) is 25,200 units.
Required:
1. What is the present yearly net operating income or loss?
2. What is the present break-even point in unit sales and in dollar sales?
3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?
4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?
In: Accounting
Forecast the Balance Sheet
Following is the balance sheet for Medtronic PLC for the year ended April 29, 2016.
| Medtronic plc | |||||
|---|---|---|---|---|---|
| Consolidated Balance Sheets | |||||
| ($ millions) | Apr. 29, 2016 | Apr. 24, 2015 | |||
| Current assets | |||||
| Cash and cash equivalents | $3,221 | $4,843 | |||
| Investments | 9,758 | 14,637 | |||
| Accounts receivable | 5,562 | 5,112 | |||
| Inventories | 3,473 | 3,463 | |||
| Tax assets | 697 | 1,335 | |||
| Prepaid expenses and other current assets | 1,234 | 1,454 | |||
| Total current assets | 23,945 | 30,844 | |||
| Property, plant, and equipment, net | 4,841 | 4,699 | |||
| Goodwill | 41,500 | 40,530 | |||
| Other intangible assets, net | 26,899 | 28,101 | |||
| Long-term tax assets | 1,383 | 774 | |||
| Other assets | 1,559 | 1,737 | |||
| Total assets | $100,127 | $106,685 | |||
| Current liabilities | |||||
| Short-term borrowings | $1,338 | $2,434 | |||
| Accounts payable | 1,709 | 1,610 | |||
| Accrued compensation | 1,712 | 1,611 | |||
| Accrued income taxes | 566 | 935 | |||
| Deferred tax liabilities | - | 119 | |||
| Other accrued expenses | 2,185 | 2,464 | |||
| Total current liabilities | 7,510 | 9,173 | |||
| Long-term debt | 30,247 | 33,752 | |||
| Long-term accrued compensation | 1,759 | 1,535 | |||
| Long-term accrued income taxes | 2,903 | 2,476 | |||
| Long-term deferred tax liabilities | 3,729 | 4,700 | |||
| Other long-term liabilities | 1,916 | 1,819 | |||
| Total liabilities | 48,064 | 53,455 | |||
| Shareholders’ equity | |||||
| Ordinary shares | - | - | |||
| Retained earnings | 53,931 | 54,414 | |||
| Accumulated other comprehensive (loss) | (1,868) | (1,184) | |||
| Total shareholders’ equity | 52,063 | 53,230 | |||
| Total liabilities and shareholders’ equity | $100,127 | $106,685 | |||
Use the following assumptions to forecast the company’s balance sheet for FY2017.
| Forecasted FY2017 net income | $5,486 |
million |
||||||
| Forecasted FY2017 net sales | $38,632 |
million |
||||||
| Accounts receivable | 19.3% |
of net sales |
||||||
| Inventories | 12.0% |
of net sales |
||||||
| Tax assets | 2.4% |
of net sales |
||||||
| Prepaid expenses and other current assets | 4.3% |
of net sales |
||||||
| Long-term tax assets | 4.8% |
of net sales |
||||||
| Other assets | 5.4% |
of net sales |
||||||
| Accounts payable | 5.9% |
of net sales |
||||||
| Accrued compensation | 5.9% |
of net sales |
||||||
| Accrued income taxes | 2.0% |
of net sales |
||||||
| Other accrued expenses | 7.6% |
of net sales |
||||||
| Long-term accrued income taxes | 10.1% |
of net sales |
||||||
| Long-term deferred tax liabilities | 12.9% |
of net sales |
||||||
| Other long-term liabilities | 6.6% |
of net sales |
||||||
| Investments | No change | |||||||
| Goodwill | No change | |||||||
| Long-term accrued compensation and retirement benefits | No change | |||||||
| Ordinary shares | No change | |||||||
| Accumulated other comprehensive (loss) | No change | |||||||
| CAPEX | 3.6% |
of net sales |
||||||
| Depreciation expense | 18.9% |
of prior year PPE, net |
||||||
| Amortization expense in FY2016 | $1,931 |
million |
||||||
| Current maturities of debt due in FY2017 | $1,338 |
million |
||||||
| Current maturities of debt due in FY2018 | $6,176 |
million |
||||||
| Dividend payout ratio | 60.5% |
Round your answers to the nearest whole number.
Do not use negative signs with any of your answers.
| Medtronic plc | ||||
|---|---|---|---|---|
| Forecasted Consolidated Balance Sheet | ||||
| ($ millions) | EST. 2017 | |||
| Current assets | ||||
| Cash and cash equivalents | Answer | |||
| Investments | Answer | |||
| Accounts receivable | Answer | |||
| Inventories | Answer | |||
| Tax assets | Answer | |||
| Prepaid expenses and other current assets | Answer | |||
| Total current assets | Answer | |||
| Property, plant, and equipment, net | Answer | |||
| Goodwill | Answer | |||
| Other intangible assets, net | Answer | |||
| Long-term tax assets | Answer | |||
| Other assets | Answer | |||
| Total assets | Answer | |||
| Current liabilities | ||||
| Short-term borrowings | Answer | |||
| Accounts payable | Answer | |||
| Accrued compensation | Answer | |||
| Accrued income taxes | Answer | |||
| Other accrued expenses | Answer | |||
| Total current liabilities | Answer | |||
| Long-term debt | Answer | |||
| Long-term accrued compensation | Answer | |||
| Long-term accrued income taxes | Answer | |||
| Long-term deferred tax liabilities | Answer | |||
| Other long-term liabilities | Answer | |||
| Total liabilities | Answer | |||
| Shareholders’ equity | ||||
| Ordinary shares | - | |||
| Retained earnings | Answer | |||
| Accumulated other comprehensive (loss) | Answer | |||
| Total shareholders’ equity | Answer | |||
| Total liabilities and shareholders’ equity | Answer | |||
In: Accounting
At the start of the current financial year Paul decided to purchase a newly constructed apartment in the city for $400,000 which he hopes will increase his long-term wealth and create some tax deductions given that he is on a 46.5% marginal tax rate. He used $80,000 of his own money as a deposit and borrowed the remaining $320,000 from Fast Finance on an interest-only loan for 5 years at a fixed interest rate of 7% p.a.. Some additional details regarding the property purchase are listed below:
Purchase price of $400,000 consisting of $375,000 for the building costs and $25,000 for depreciable plant and equipment. A building allowance of 2.5% p.a. and plant and equipment depreciation of 20% p.a. is available for the purchase on a straight-line basis. Property rental of 6% p.a. gross (of the total purchase cost) with annual cash-based operating expenses (excluding financing) of $10,000.
(a) Paul asks you to prepare a table to show how the income from the apartment would be taxed and how it would affect his after-tax cash flow. Use the information provided to complete the pro-forma table below for the first year after the property purchase.
Cash flow Details $
Gross rent
Less property expenses paid in cash
Less interest payments
Net cash outflow before tax (A)
Less depreciation of building
Less depreciation of furniture, fittings, etc.
Taxable income
Tax loss (i.e. tax savings) (B)
After-tax cash flow (B-A)
In: Accounting
Consider a project to supply 100 million postage stamps per year to the USPS for the next five years. To pursue the project, you will need to install $4.1 million in new manufacturing plant and equipment. This will be depreciated straight-line to zero over the project’s five years. The equipment can be sold for $540,000 at the end of the project. You will also need $600,000 in initial net working capital for the project and an additional investment of $50,000 in every year thereafter. All net working capital will be recouped at the end of the project. Your production costs are $.005 per stamp and you have fixed costs of $950,000 per year. If your tax rate is 34% and your required return is 12%, what bid price should you submit on the contract.
In: Finance
A marketing researcher wants to estimate the mean amount spent per year ($) on a web site by membership member shoppers. Suppose a random sample of 100 membership member shoppers who recently made a purchase on the web site yielded a mean amount spent of $57 and a standard deviation of $ 54 Complete parts (a) and (b) below.
a. Is there evidence that the population mean amount spent per year on the web site by membership member shoppers is different from %51 (Using a .01 level of significance)
Identify the critical value(s).
Determine the test statistic.
State the conclusion.
Determine the p-value and interpret its meaning
In: Math
The January 1, Year 1 trial balance for the Wilson Company is found on the trial balance tab. The beginning balances are assumed. Smith Co. entered into the following transactions involving short-term liabilities. (Use 360 days a year.) Year 1 Apr. 20 Purchased $43,750 of merchandise on credit from Sanchez, terms n/30. May 19 Replaced the April 20 account payable to Sanchez with a 90-day, 8%, $38,000 note payable along with paying $5,750 in cash. July 8 Borrowed $102,000 cash from NBR Bank by signing a 120-day, 12%, $102,000 note payable. Aug. 17 Paid the amount due on the note to Sanchez at the maturity date. Nov. 5 Paid the amount due on the note to NBR Bank at the maturity date. Nov. 28 Borrowed $63,000 cash from Chicago Bank by signing a 60-day, 12%, $63,000 note payable. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Chicago Bank. Year 2 Jan. 27 Paid the amount due on the note to Chicago Bank at the maturity date.
General Journal tab - Prepare the Year
1 journal entries related to the notes and accounts payable of
Smith Co.
Calculation of interest tab - Use the
interest formula (P x R x T) to verify the amount of interest
recorded in your entries. Verify that total interest expense agrees
with the trial balance.
Year 2 payment tab - Prepare the January
27, Year 2 entry to record the repayment of the note at
maturity.
In: Accounting
|
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $99 per unit, and variable expenses are $69 per unit. Fixed expenses are $831,600 per year. The present annual sales volume (at the $99 selling price) is 25,700 units. |
| Required: | |
| 1. |
What is the present yearly net operating income or loss? |
| 2. |
What is the present break-even point in unit sales and in dollar sales? |
| 3. |
Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit? |
| 4. |
What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)? |
In: Accounting