Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $70,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $30,800. A new piece of equipment will cost $160,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Savings 1 $ 68,000 2 60,000 3 58,000 4 56,000 5 53,000 6 42,000 The firm’s tax rate is 25 percent and the cost of capital is 11 percent. a. What is the book value of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) b. What is the tax loss on the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) c. What is the tax benefit from the sale? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) d. What is the cash inflow from the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) e. What is the net cost of the new equipment? (Include the inflow from the sale of the old equipment.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) f. Determine the depreciation schedule for the new equipment. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.) g. Determine the depreciation schedule for the remaining years of the old equipment. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.) h. Determine the incremental depreciation between the old and new equipment and the related tax shield benefits. (Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) i. Compute the aftertax benefits of the cost savings. (Enter the aftertax factor as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) j-1. Add the depreciation tax shield benefits and the aftertax cost savings to determine the total annual benefits. (Do not round intermediate calculations and round your answers to the nearest whole dollar.) j-2. Compute the present value of the total annual benefits. (Do not round intermediate calculations and round your answer to the nearest whole dollar.) k-1. Compare the present value of the incremental benefits (j) to the net cost of the new equipment (e). (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) k-2. Should the replacement be undertaken? Yes No

I have the answers for A through D. I just can't figure out the rest.

Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $78,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $34,800. A new piece of equipment will cost $230,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

The firm’s tax rate is 40 percent and the cost of capital is 10 percent.

a. What is the book value of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
  

b. What is the tax loss on the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
  

c. What is the tax benefit from the sale? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
  

d. What is the cash inflow from the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
  

e. What is the net cost of the new equipment? (Include the inflow from the sale of the old equipment.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
  

f. Determine the depreciation schedule for the new equipment. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.)
  

g. Determine the depreciation schedule for the remaining years of the old equipment. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.)
  

h. Determine the incremental depreciation between the old and new equipment and the related tax shield benefits. (Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.)
  

i. Compute the aftertax benefits of the cost savings. (Enter the aftertax factor as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.)
  

j-1. Add the depreciation tax shield benefits and the aftertax cost savings to determine the total annual benefits. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
  

j-2. Compute the present value of the total annual benefits. (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
  

k-1. Compare the present value of the incremental benefits (j) to the net cost of the new equipment (e). (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.)
  

k-2. Should the replacement be undertaken?
  

Ivanhoe Leasing Company (lessor) agrees to lease equipment to Sarasota Construction (Lessee) on January 1, 2017. The following information relates to the lease agreement.

(a) the term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.

(b) the cost of the machinery is $653,420 , and the fair value of the asset on January 1, 2017, is $887,406.

(c) At the end of the lease term, the asset reverts to the lessor and has an unguaranteed residual value of $100,000. Sarasota incurs initial direct costs of $1,400 and amortizes all of its leased equipment on a straight line basis. In addition, Sarasota agrees to pay the fixed annual insurance on the equipment of $3,000 to Ivanhoe at the same time as the rental payments.

(d) the lease agreement requires equal annual rental payments, beginning on January 1, 2017.

(e) the collectibility of the lease payments is probable.

(f) Ivanhoe desires an 10% rate of return on its investments. Sarasota's incremental borrowing rate is 12%, and the lessor's implicit rate is unknown to Sarasota.

calculate the amount of the annual rental payment required by Lessor including the fixed insurance payment (hint: calculate annual rental payment without insurance first)

Square Manufacturing is considering investing in a robotics manufacturing line. Installation of the line will cost an estimated $9.7 million. This amount must be paid immediately even though construction will take three years to complete (years 0, 1, and 2). Year 3 will be spent testing the production line and, hence, it will not yield any positive cash flows. If the operation is very successful, the company can expect after-tax cash savings of $6.7 million per year in each of years 4 through 7. After reviewing the use of these systems with the management of other companies, Square’s controller has concluded that the operation will most probably result in annual savings of $4.9 million per year for each of years 4 through 7. However, it is entirely possible that the savings could be as low as $2.5 million per year for each of years 4 through 7. The company uses a 16 percent discount rate. Use Exhibit A.8.

Required:

Compute the NPV under the three scenarios. (Round PV factor to 3 decimal places. Enter your answers in thousands of dollars. Negative amounts should be indicated by a minus sign.)

1.best case

2.Expected

3. worst case

              On January 1, 2019, Jameel Company engaged Galadari Engineering Company to construct

              a special purpose machinery.Construction began immediately and completed on October 1 ,2019.

              To help finance construction , on January 1, 2019 Otaibi issued a $500,000, 3 year 12% note payable

               at Emirates Bank on which interest is payable every December 31. $375,000 of the proceeds of the

               note was paid to Galadari on January 1, 2019.The reminder of the proceeds was temporarily   

              invested in short- term marketable securities (trading securities) at 10% until October 1.

              On October1, Jameel made a final $125,000 payment to Galadari. Other than the note to Emirates

              Bank, Jameel’s only outstanding liability on December 31, 2019 is a 40,000 ,8% 6 year note-

               -payable,dated January 1, 2016 on which interest is payble each December 31.

              Required:

1. Calculate the interest revenue, weighted -average accumulated expenditures, avoidable interest        and total interest cost to be capitalized during 2019. (round all computations to the nearest dollar).
   
2. Prepare journal entrres needed on the books of Jameel Company at each of the following dates.

1. January 1, 2019
2. October 1, 2019
3. December 31, 2019

Oliver, who owns a construction supply store and sidelines as an engineering consultant, had the following transactions during the year:

Salaries, net of withholding tax of P33,000 and sss/ph/pag-ibig benefits of P11,000                           419,560

Hazard pay given by the employer                                                                                                                       54,650

Various de minimis benefits (within limits)                                                                                                        56,125

Gross Sales of Merchandise                                                                                                                            1,935,600

Disbursements:

Cost of Sales                                                                                                                                                         423,490

Salaries and allowances                                                                                                                                    325,670

Taxes and licenses, including income tax of P14,000                                                                                    135,690

Insurance Expense                                                                                                                                                95,670

Depreciation, including depreciation for household furniture of P7,800                                                60,530

Bad debts written off, including P35,000 receivable from his brother                                                 120,500

Interest expense, including interest on loan from his father of P14,500                                               84,680

Business rentals                                                                                                                                                 105,670

Light, water and telephone                                                                                                                            258,940

Losses, including losses due to fire of P120,000 covered by insurance                                             340,520

Charitable contribution, including to victims of the marawi siege for

    P135,000 and P300,000 to the national museum                                                                                   183,530

Miscellaneous expenses, including medical expense of the household staff              

   For P4,500 and educational expense of a son for P25,000                                                                    87,730

Requirement:

Compute for the net taxable income and regular annual income tax of Oliver.

(MIRR) Star Industries owns and operates landfills for several municipalities throughout the Midwestern part of the U.S. Star typically contracts with the municipality to provide land services for a period of 20 years. The firm then constructs a lined landfill (required by federal law) that has capacity for five years. The $9.8 million expenditure required to construct the new landfill results in negative cash flows at the end of years 5, 10, and 15. This change in sign on the stream of cash flows over the 20 year contract period introduces the potential for multiple IRRs, so Star's management has decided to use the MIRR to evaluate new landfill investment contracts. The annual cash inflows to Star begin in year 1 and extend through year 20 are estimated to equal $4.1 million (this does not reflect the cost of constructing the landfills every five years). Stars uses a 9.6% discount rate to evaluate its new projects, so it plans to discount all the construction costs every five years back to year 0 using this rate before calculating the MIRR.

a). What are the project's NPV, IRR, and MIRR

b). Is it a good investment opportunity for Star Industries? Why or why not?

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 36,000 of these balls, with the following results: Sales (36,000 balls) $ 900,000 Variable expenses 540,000 Contribution margin 360,000 Fixed expenses 263,000 Net operating income $ 97,000 (5) Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, 6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $97,000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 36,000 balls (the same number as sold last year). Prepare a contribution format income statement and Compute the degree of operating leverage.