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.

2.5. What conclusion can be drawn by comparing the results of the before- and after-tax analyses?

Average Rate of Return

Lakeland Company is considering the purchase of equipment for $175,000. The equipment will expand the Company's production and increase revenue by $40,000 per year. Annual cash operating expenses will increase by $12,000. The equipment's useful life is 10 years with no salvage value. Lakeland uses straight-line depreciation. The income tax rate is 25%. What is the average rate of return on the investment?

Round answer to the nearest whole percentage, if applicable.

Average rate of return on investment %? I have the answer as .045 which would round to 5% but the answer keeps getting marked as incorrect.

CASE 9‐6 Depreciation Accounting

Property, plant, and equipment (plant assets) generally represent a material portion of the total assets of most companies. Accounting for the acquisition and use of such assets is therefore an important part of the financial reporting process.

Required:

1. Distinguish between revenue and capital expenditures, and explain why this distinction is important.
2. Briefly define depreciation as used in accounting.
3. Identify the factors that are relevant in determining the annual depreciation, and explain whether these factors are determined objectively or whether they are based on judgment.
4. Explain why depreciation is shown as an adjustment to cash in the operations section on the statement of cash flows.

The New York State Electric and Gas Corporation filed a request for a 10.7% increase in electric revenues. The reasons given to justify the increase were that the value of the firm’s plant and equipment had increased by $140 million, operating costs had increased, and investors required a higher rate of return.

a. Why should an increase in the value of the fi rm’s plant and equipment result in an increase in the amount of revenue allowed by the Public Service Commission?
b. Why should an increase in operating costs have the same effect?
c. Why should the attitude of investors regarding what they require as a rate of return be relevant here?

____ Which of the following statements is NOT true?

1. The four subsystems of the budget execution phase are tax administration, cash management, procurement, and risk management.
2. Government investment planning is important mostly in times of rising revenues and revenue surpluses. It is not important in times of austerity.
3. The primary differences between T-Bills, T-Notes, and T-bond are: lengths of their maturities; and the rates of return.
4. The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded.
5. A derivative is a very complex device that derives its value from the performance of an underlying security or market index.

you have saved up some money to start a dog grooming business! Fluffy Grooming begins operations in December 2018. Record all of the December transactions, produce financial statements, and close the accounts.

(A) Record rent expense for December.

(B) Accrue $250 earned, but not yet recorded.

(C) Accrue $75 wages expense for work performed Dec 29-31.

(D) Only $300 office supplies are still on hand. Record office supplies used.

(E) Record $40 depreciation on grooming equipment.

(F) $100 of the unearned revenue has now been earned.

Taxpayers in the state of Kentucky alleged that a tax on out-of-state municipal bonds that excluded interest from in-state bonds was a violation of the commerce clause. Representatives of the state argued that the tax reflected a traditional government function that could persist without any differential treatment of local interests against the similar interests of out-of-state entities. Additionally, because Kentucky itself participates in the bond market, its potential discrimination should be found allowable. How would you have ruled in this case? Why? [Department of Revenue of Kentucky v. George W. Davis, 553 U.S. 328 (2008).]

"The A.M.I. Company is considering installing a new process machine for the firm's manufacturing facility. The machine costs $555,000 installed, will generate additional revenue of $70,000 per year, and will save $69,000 per year in labor and material costs. The machine will be financed by a $223,000 bank loan repayable in three equal annual installments with a 6% interest rate. The machine will be depreciated using seven-year MACRS. The useful life of the machine is 10 years when the machine will be sold for $22,000. The marginal tax rate is 40%. Compute the IRR of the investment. Enter your answer as a percentage between 0 and 100."

"The A.M.I. Company is considering installing a new process machine for the firm's manufacturing facility. The machine costs $540,000 installed, will generate additional revenue of $71,000 per year, and will save $64,000 per year in labor and material costs. The machine will be financed by a $217,000 bank loan repayable in three equal annual installments with a 5% interest rate. The machine will be depreciated using seven-year MACRS. The useful life of the machine is 10 years when the machine will be sold for $24,000. The marginal tax rate is 32%. Compute the IRR of the investment. Enter your answer as a percentage between 0 and 100."