7-5
A machine costing $211,400 with a four-year life and an estimated $15,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 491,000 units of product during its life. It actually produces the following units: 121,600 in 1st year, 123,900 in 2nd year, 120,800 in 3rd year, 134,700 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)
Required:
Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.)
Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Straight-line depreciation.
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Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Units of production.
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Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Double-declining-balance.
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In: Accounting
A machine costing $214,400 with a four-year life and an estimated $18,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 491,000 units of product during its life. It actually produces the following units: 122,100 in 1st year, 123,200 in 2nd year, 120,600 in 3rd year, 135,100 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)
Required:
Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.)
Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Straight-line depreciation.
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Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Units of production.
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Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Double-declining-balance.
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In: Accounting
The cash flows for three independent projects are found below:
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Year 0 (Initial investment) |
$(70,000) |
$(110,000) |
$(420,000) |
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Year 1 |
$11,000 |
$28,000 |
$220,000 |
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Year 2 |
17,000 |
28,000 |
220,000 |
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Year 3 |
21,000 |
28,000 |
220,000 |
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Year 4 |
26,000 |
28,000 |
— |
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Year 5 |
33,000 |
28,000 |
— |
.
a. Calculate the IRR for each of the projects.
b. If the discount rate for all three projects is 13 percent, which project or projects would you want to undertake?
c. What is the net present value of each of the projects where the appropriate discount rate is 13 percent?
In: Finance
Managers of CVS Pharmacy are considering a new project. This project would be a new store in Odessa, Texas. They estimate the following expected net cash flows if the project is adopted. Year 0: ($1,250,000) Year 1: $200,000 Year 2: $500,000 Year 3: $400,000 Year 4: $300,000 Year 5: $200,000 Suppose that the appropriate discount rate for this project is 7.7%, compounded annually. Calculate the net present value for this proposed project. Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. If the NPV is negative, include a minus sign. Do not type the $ symbol.
In: Finance
Assume you are to receive a 10-year annuity with annual payments of $800. The first payment will be received at the end of year 1, and the last payment will be received at the end of year 10. You will invest each payment in an account that pays 7 percent compounded annually. Although the annuity payments stop at the end of year 10, you will not with draw any money from the account until 20 years from today, and the account will continue to earn 7 percent for the entire 20-year period. What will be the value in your account at the end of year 20 (round to the nearest dollar)
In: Finance
Bond A is a 10% coupon bond with a face value of $1,000 and a maturity of 3 years. The discount rate (required return, or interest rate) is 8% now or in the future.
A. What is the bond price now, in year 1, in year 2, and in year 3
(P0,P1,P2 and P3)?
B. If you buy the bond now and hold it for one year, what is the
(expected) rate of return?
C. If you buy the bond at year 1 and hold it for one year, what is
the (expected) rate of return?
D. If you buy the bond now and hold it until its maturity, what is
the (expected) rate of return?
In: Accounting
Managers of CVS Pharmacy are considering a new project. This project would be a new store in Odessa, Texas. They estimate the following expected net cash flows if the project is adopted.
Year 0: ($1,250,000)
Year 1: $200,000
Year 2: $500,000
Year 3: $400,000
Year 4: $300,000
Year 5: $200,000
Suppose that the appropriate discount rate for this project is 5.2%, compounded annually.
Calculate the net present value for this proposed project.
Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. If the NPV is negative, include a minus sign. Do not type the $ symbol.
In: Finance
A proposed new investment has projected sales of 15,000 units in year 1 and 20,000 units in year 2. The sales price for both years will be $10 per unit. The project will terminate after the second year. Variable costs are expected to be 50% of sales. Fixed costs will be $25,000 per year. The investment will cost $20,000 and will be depreciated straight line to $0 over the 2 year period. The tax rate is 34% for both years and the investment will be worthless after 2 years. Please prepare projected income statements for each of the 2 years and calculate the operating cash flow for each year.
In: Accounting
Vandezande Inc. is considering the acquisition of a new machine that costs $435,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.):
| Incremental Net Operating Income | Incremental Net Cash Flows | |||||
| Year 1 | $ | 76,000 | $ | 155,000 | ||
| Year 2 | $ | 82,000 | $ | 161,000 | ||
| Year 3 | $ | 93,000 | $ | 175,000 | ||
| Year 4 | $ | 56,000 | $ | 158,000 | ||
| Year 5 | $ | 98,000 | $ | 160,000 | ||
Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period of this investment is closest to:
In: Accounting
Assume that the population of a town obeys Malthusian growth. Assume that the size of the population was 2000 in year 1900, and 50 000 in year 1950.
(a) Find the value of the growth constant k.
(b) How long does it take for the population to grow by 20%?
(c) How big was the population in year 2000?
(d) What was the rate of change of the population in year
2000?
(e) Calculate the size of the population in year 2001, and from
that the actual change in population during the one year, from 2000
to 2001.
(f) Explain why the two values calculated in (d) and (e) above do
not necessarily have to be the same.
In: Statistics and Probability