12. A project earns $10,000 a year for five years. The present total value of the project is (using a discount rate of 5.75%):
    a) $50,000
    b) more than $50,000

    c) less than $50,000

13. The NPV of a project is $1,012, using a discount rate of 9.75% p.a. The rate of return on this project is:

    a) 9.75%
    b) more than 9.75% c) less than 9.75%

14. The NPV of a project is 0, using a discount rate of 10%. The rate of return on this project is:

    1. a) 10%

    2. b) more than 10%

    3. c) lessthan10%

15. A machine has a salvage value of $5,000. Using a discount rate of 5% p.a., the present value of the salvage value is:

    a) $5,000
    b) more than $5,000 c) lessthan$5,000

16. The capital cost of a project that lasts for five years is $50,000. Using a discount rate of 2.95%, the annual worth of the capital cost is:
    a) $10,000
    b) more than $10,000

    c) lessthan$10,000

17. A machine has a salvage value of $5,000 after five years. Using a discount rate of 2.95% p.a., the annual worth of the salvage value is:
    a) $1,000
    b) more than $1,000

    c) lessthan$1,000

18. The NAW of a project is 0, using a discount rate of 6%. The rate of return on this project is:

    1. a) 6%

    2. b) more than 6%

    3. c) lessthan6%

Suppose that wages in Miami among the immigrant population are $20,000 a year and everywhere else outside the United States they are $10,000. Suppose the cost of migrating to Miami is proportional to how far someone must travel.   The cost of migrating is M=$36,000+ 20m, where m is the number of miles an immigrant’s origin country is from Miami. Please use this information to answer the following questions.

1. If Colombia is 1,500 miles from Miami, what is the maximum subjective discount factor that a Colombian migrant would have and still choose to immigrate to Miami?

2. If Cuba is 200 miles from Miami, what is the maximum subjective discount factor that a Cuban migrant could have and still choose to immigrate to Miami?

3. Based on the prior two questions should we see more migrants from Cuba or Colombia come to Miami?

Select one:

a. Cuba

b. Columbia

The following information pertains to the first year of operation for Crystal Cold Coolers Inc.:

Required:
Prepare Crystal Cold’s full absorption costing income statement and variable costing income statement for the year. (Do not leave any numeric cells blank, enter a zero wherever required.)

A company is considering a 5-year project that opens a new product line and requires an initial outlay of $81,000. The assumed selling price is $96 per unit, and the variable cost is $62 per unit. Fixed costs not including depreciation are $22,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 13% per year, what is the financial break-even point? (Answer to the nearest whole unit.)

Detailed explanation please

Miss Yu is performing the audit on leases of TipuPte Ltd for the year ended 31 December 2016. From the ledger, Miss Yu noticed that there are three items. which are on lease, i.e. a van, a lathe machine and the oven. As part of the audit, Miss Yu would send standard confirmation letters to the lessors. Two days before the end of the fieldwork, Miss Yu received confirmation from the van's lessor. Miss Yu's client has short taken the van lease by $10,000. Miss Yu sent the second reminder confirmation and managed to receive the confirmation from the lathe machine's lessor. The lease would only start from 1 January 2017. Miss Yu has to yet receive any confirmation pertaining to the leasing of the oven.

Required

a. What should Miss Yu do in the future to make sure that the confirmation letter are received and answered promptly?

b. There are discrepancies to two of the items. What further action should Miss Yu take?

Question 2

Hydropure Ltd commenced operations at the beginning of the current year. One of the company’s products, an alkaline antioxidant water filter, sells for $299 per unit. Information related to the current year’s activities are as follows:

$

Variable costs per unit:

Direct materials 40

Direct labour   74

Manufacturing overhead 96

Annual fixed costs:

Manufacturing overhead 700,000   

Selling and administrative 880,000

Production and sales activity:

Production (units) 25,000
Sales (units) 20,000

Hydropure Ltd carries its finished goods inventory at the average unit cost of production. There was no work in process at the yearend.

Required:

(a) Determine the cost of the yearend finished goods inventory.

(b) Calculate Hydropure Ltd’s net profit for the current year. Ignore taxation.

(c) If the next year’s production decreases to 24,000 units and the general cost behaviour and patterns do not change, what is the likely effect on:

(i) Direct labour cost of $74 per unit? Explain why.

(ii) Fixed manufacturing overhead cost of $700,000? Explain why.

(iii) Fixed selling and administrative cost of $880,000? Explain why.

(iv) Average unit cost of production? Explain why.

Common information for problems 4 and 5

A 20-year loan of 150,000 is negotiated with the borrower agreeing to repay principal and interest at 5%. A level payment of 9,000 will apply during the first ten years and a higher level payment will apply during the remaining ten years. Each time the lender receives a payment from the borrower, he will deposit the portion representing the principal into a sinking fund with an annual effective interest rate of 4%. (Assume that the interest portion remains level throughout these 20 years and assume that all but the interest portion is deposited into the sinking fund.) This scheme will replace the lender’s capital.

Find the lender’s yield on this investment.

A 20-year loan of 150,000 is negotiated with the borrower agreeing to repay principal and interest at 5%. A level payment of 9,000 will apply during the first ten years and a higher level payment will apply during the remaining ten years. Each time the lender receives a payment from the borrower, he will deposit the portion representing the principal into a sinking fund with an annual effective interest rate of 4%. (Assume that the interest portion remains level throughout these 20 years and assume that all but the interest portion is deposited into the sinking fund.) This scheme will replace the lender’s capital.

What is the higher payment (rounded to the nearest dollar) that applies during the years 11-20?

A car dealer leases a small computer with software for $5,000 per year. As an alterative he could buy the computer for $7,500 and lease the software for $3,500 per year. Any time he would decide to switch to some other computer he could cancel software lease and sell the computer for $500.  

A. If he buys the computer and leases the software, what is the payback period?

B. If he kept the computer and software for 8 years, what would be the benefit-cost ratio, based on a 5% interest rate.