Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $620,000 cost with an expected four-year life and a $34,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round PV factor value to 4 decimal places.)

Required:
1. Compute straight-line depreciation for each year of this new machine’s life.
2. Determine expected net income and net cash flow for each year of this machine’s life.
3. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year.
4. Compute this machine’s accounting rate of return, assuming that income is earned evenly throughout each year.
5. Compute the net present value for this machine using a discount rate of 4% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset’s life.)

Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information:

Shane Whitebone is getting to know his new client, Clarrie Potters, a large discount electrical retailer. Ben Brothers has been the engagement partner on the Clarrie Potters’ audit for the past five years, but the audit partner rotation rules have meant that the engagement partner has had to change this year. Shane discovers that toward the end of last year, Clarrie Potters installed a new IT system for inventory control. The system was not operating prior to the end of the last financial year, so its testing was not included in the previous audit. The new system was built for Clarrie Potters by a Montreal-based software company, which modified another system it had designed for a furniture manufacturer and retailer. Which of the following audit risks are associated with the installation of the new inventory IT system at Clarrie Potters?

A. Whether the new system accurately processes transactions

B. Whether staff are changing passwords regularly

C. Whether there is limited access to posting journal entries

D. Whether the system can be overridden or bypassed by management or staff

E. Whether there is adequate backup

F. Whether there are sufficient controls over program changes

G. Whether there was the appropriate transfer of information from the old IT system to the new system

H. Whether the new system produces sufficient management reports (e.g., exception reports) to show that the client is monitoring its performance

TDK corp. capital budgeting

Existing:

salary and benefits for one full time operator- $35,000

cost of maintenance- 3,000 per year

cost of defects- 7,000 per year

original cost of old machine - 125,000

annual depreciation- 13,000 per year

current salvage value- 75,000

current age of machine- 4 years

Proposed:

cost of new machine- 160,000

instalation and shipping fees- 24,000

cost of maintenance- 4,000 per year

cost of defects- 3,000 per year

expected life- 6 years

salvage value at end of machines life- 33,000

depreciation method is straight line

also, the new machine will require TDK to increase their inventory level by $90,000 and also increase their current liabilities by $60,000. Prior to purchasing a new machine, TDK Paid a marketing consultant $8500 to determine the potential for new market share associated with replacing the old machine with a new machine with greater production capabilities. It should also be noted that a local merchant paid $7000 per year to use TDK’s Old machine during after hours for the production of their product. The merchant indicates that the new machine will not be suitable for her production process and therefore will discontinue the lease payment. Assuming TDK is in the 21% marginal tax bracket, calculate the initial investment and yearly cash flow’s associated with the new machine. Label all of your cash flow estimates

Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $491,000 cost with an expected four-year life and a $15,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Compute straight-line depreciation for each year of this new machine’s life.
2. Determine expected net income and net cash flow for each year of this machine’s life.
3. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year.
4. Compute this machine’s accounting rate of return, assuming that income is earned evenly throughout each year.
5. Compute the net present value for this machine using a discount rate of 6% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset’s life.)

Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information:

If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck is purchased, it will be used for five years, after which it will be traded in on another truck. The new truck would be diesel-operated, resulting in a substantial reduction in annual operating costs, as shown above.

The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 6% discount rate.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. What is the net present value of the “keep the old truck” alternative?

2. What is the net present value of the “purchase the new truck” alternative?

3. Should Bilboa Freightlines keep the old truck or purchase the new one?

Greensboro Company purchased a machine five years ago for $350,000. On its tax return, Greensboro depreciated the asset using the straight-line method to a zero salvage value over ten years. Now, this used machine could be sold for $120,000.

A new machine has recently become available that will cost $950,000 and last for five years. If purchased, the new machine will save $300,000 per year in before tax operating costs and be depreciated by the straight-line method over five years to a zero salvage value for income tax purposes..  

At the end of five years, Greensboro estimates the new machine could be sold for $50,000 while the old machine, if kept, would only sell for $18,000.

Greensboro requires a 15% after-tax rate of return and its relevant income tax rate is 30%.

1. Determine the net after-tax cash outlow at time zero (CF0) if Greensboro were to purchase the new machine and sell the (used) old machine.
2. Determine the incremental after-tax cash benefits at times 1 through 5 if Greensboro were to acquire the new machine and sell the old machine.
3. Determine that incremental after-tax cash flows at the projects end (time 5*) if Greensboro were to acquire the new machine rather than keep the old machine.
4. Should Greensboro acquire the new machine to replace the old machine?

No excel if possible

The controller of Tri Con Global Systems Inc. has developed a new costing system that traces the cost of activities to products. The new system is able to measure post-manufacturing activities, such as selling, promotional, and distribution activities, and allocate these activities to products in a manner that provides a more complete view of the company's product costs. This system produces better strategic information about the relative profitability of product lines. In the course of implementing the new costing system, the controller realized that the company's current period GAAP net income would increase significantly if the new product cost information were used for inventory valuation on the financial statements. The controller has been under intense pressure to improve the company's net income, and this would be an easy and effective way for her to help meet the company's short-term net income goals. As a result, she has decided to use the new costing system to determine GAAP net income. Instructions: Answer the questions below using 150 words or more for both questions. After this, make sure to reply to one of your peer's responses using 50 words or more. Pencil Why does the company's net income increase when the new costing system is applied? Pencil Is the controller acting ethically by using the new costing system for GAAP net income? Explain your answer.

Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information:

If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck is purchased, it will be used for five years, after which it will be traded in on another truck. The new truck would be diesel-operated, resulting in a substantial reduction in annual operating costs, as shown above.

The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 11% discount rate.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. What is the net present value of the “keep the old truck” alternative?

2. What is the net present value of the “purchase the new truck” alternative?

3. Should Bilboa Freightlines keep the old truck or purchase the new one?

Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information:

If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck is purchased, it will be used for five years, after which it will be traded in on another truck. The new truck would be diesel-operated, resulting in a substantial reduction in annual operating costs, as shown above.

The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 9% discount rate.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. What is the net present value of the “keep the old truck” alternative?

2. What is the net present value of the “purchase the new truck” alternative?

3. Should Bilboa Freightlines keep the old truck or purchase the new one?