A small company heats its building and spends ​$8000 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 9​% per year starting one year from now​ (i.e., the first cash flow is ​$8,720 at EOY​ one). Their maintenance on the gas furnace is ​$350 per​ year, and this expense is expected to increase by 15​% per year starting one year from now​ (i.e., the first cash flow for this expense is $402.50 at the EOY​ one). If the planning horizon is 15 ​years, what is the total annual equivalent expense for operating and maintaining the​ furnace? The interest rate is 20​% per year.

What is the total annual equivalent expense for operating and maintaining the furnace?

Please show all work.

Income Statement Accounts for the Year Ending 2017

Account Balance

Cost of goods sold $1,415,000

Interest expense $293,000

Taxes $227,600

Revenue $2,985,000

​Selling, general, and administrative expenses $453,000

Depreciation $255,000

Income statement. From the following income statement accounts in the popup​ window, (popup window info above)

a. produce the income statement for the year.

b. produce the operating cash flow for the year.

a. produce the income statement for the year.

Complete the income statement below. (Round to the nearest​ dollar.)

b. produce the operating cash flow for the year.

The operating cash flow for the year is

$______. ​(Round to the nearest​ dollar.)

The pottery shop opened a new branch this year. The following figures show the sales volume and advertising expenses.

Sales LY $900,000

Sales TY $1,050,000

Sales plan for next year $975,000

Advertising costs LY $28,500

Advertising costs TY $32,000

Advertising plan $27,500

a. What do the sales trends reflect?

b. What do the advertising costs reflect?

c. What is the percent of increase in sales from last year to next year's plan?

d. What is the percent of increase or decrease in advertising between last year and next year?

e. What is the percent of decrease in sales from this year to next year?

f. Why do you think these fluctuations of volume and expenses might be planned?

A machine can be purchased for $180,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied, using a five-year life and a zero salvage value.

Compute the machine’s payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places.)
  

Suppose the pure expectations theory of the term structure is correct. You can buy a 2-year discount bond with a face value of $1500 for $1360.54. You plan to sell it next year for a price you expect will be $1456.31

a. What is the annual rate of return on 2-year bonds? Explain?

b. What is the rate of return on a 1-year discount bond you expect will hold next year? Explain.

c. What is the rate of return on a 1-year discount bond today? Why?

d. Suppose that, contrary to what was found in part c., the current one-year rate was .04 (4%). Explain what forces would move it to the level you found in part c. (Hint: there are arbitrage opportunities?)

Suppose the pure expectations theory of the term structure is correct. You can buy a 2-year discount bond with face value of $1500 for $1360.54. You plan to sell it next year for a price you expect will be $1456.31. a. what is the annual rate of return on 2-year bonds? Explain. b. What is the rate of return on 1-year discount bonds you expect? will it hold next year? explain. c. What is the rate of return on 1-year discount bonds today? why? d. Suppose that, contrary to what you found in part c., the current one-year rate was .04 (4%). Explain what forces would move it to the level you found in part c. (Hint: are there arbitrage opportunities?)

Jaide and Jim plan to send their daughter Sarah (currently 7-year old) to university at the age of 18 for a 4-year undergraduate program in Ontario Tech. University. They intend to invest ANNUALLY in a GIC account, which pays 3.5% interest per year. That is, the first annual deposit occurs today (i.e. 7th birthday) until she turns 17. The university tuition currently is $8,000 per year. It is estimated that the tuitions grow at the inflation rate (2% per year). Tuitions will be paid at the beginning of each year (i.e. when Sarah is 18,19,20, and 21). Assume there is no tax to be paid on the account upon withdrawal. How much should the parents save each year to be able to fully fund their daughter’s university tuition expenses?

Consider the following US treasury rate table expressed in percentage.

What is the the yield to maturity of a 2 year 5% bond with annual payments? (Hint: Use the General Formula to find the price first, then compute the yield to maturity)

Tao Wang is considering leasing space for five years for his Chinese Buffet food establishment. He has three lease options as follows:

1. Fixed lease options:

Pay $5,000 per month for sixty months beginning on the first day of the five-year lease.

Pay $55,000 per year on the first day of each year for five years.

2. Mixed lease option: Pay $25,000 on the first day of each year and 3 percent of annual sales on the last day of each year for five years. The forecasted annual sales are $1,400,000 for the first year, and sales are expected to increase by 5 percent each year.

Assume Tao’s cost of capital is 10 percent.

Determine the Mixed Lease Option

Scenario 2: A firm is considering which of two devices to install to reduce costs. Both devices have a useful live of 5 years and zero salvage value. The firm has a MARR of 12% per year and a reinvestment rate of 10% per year.

Device A costs $10,000 dollars and is expected to save $3,000 annually.

Device B costs $13,500 and will provide cost savings of $3,000 the first year, $3,500 the second year, $4,000 the third year, $4,500 the fourth year, and $5,000 the fifth year.

2A. Which device is the challenger? 2B. Use the defender-challenger approach to calculate the incremental external rate of return for Scenario 2. If the incremental external rate of return is 11.75%, which device would you recommend?