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 $515,000 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 7% 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 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?

A method currently used by doctors to screen women for possible breast cancer fails to detect cancer in 20% of the women who actually have the disease. A new method has been developed that researchers hope will be able to detect cancer more accurately. A random sample of 81 women known to have breast cancer were screened using the new method. Of these, the new method failed to detect cancer in 14. Let p be the true proportion of women for which the new method fails to detect cancer. The investigator wants to conduct an appropriate test to see if the new method is more accurate using α = 0.05. Assume that the sample size is large.

Answer the following four parts

Part 1) What is the research hypothesis?

(a)Ha : p ≠ 0.20

(b)Ha : p > 0.20

(c)Ha : p < 14/81

(d)Ha : p < 0.20

Part 2) Report the value of the appropriate test statistic formula.

Part 3) What is the approximate p-value of your test?

(a)0.7291

(b)0.2291

(c)0.2709

(d)0.39

Part 4) What is the conclusion?

(a) Sufficient evidence to say that the new method is more accurate than the method currently used by the doctors

(b) Insufficient evidence to say that the new method is more accurate than the method currently used by the doctors

(c) Reject H0 at α = 0.05

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 $499,000 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.) Please show how to solve PV Value.

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?

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