1. Mary Bighair is considering investing in a beauty salon that will cost her $17,000. The after-tax cash flows on the investment should be about $5,000 per year for the next 7 years. Her opportunity cost of capital is 11.2 percent. Find the Profitability Index (PI) of buying the beauty salon: (Do not round intermediate calculations; round final answer to four decimals, i.e. 123.4567)

2. Based on the Profitability Index (PI) results you obtained in the previous question, is the beauty salon a good investment? Why or why not? Explain fully.

Please write a brief response to the following post:

The cost factor is the main managing choice that drove Amazon's choice of delivering distinctive segments that goes into Kindle. Truly, these are the correct choices since the assembling costs will include upto the all out expense of the item, they needed to keep it low by keeping up great quality. So as to contend in the wild challenge, Kindle brought to the table the item at low cost and high usefulness which Asian nations lead at. Subsequently Amazon's choice of delivering distinctive part at better places are correct choices. The way that just $40– $50 of the esteem related with assembling the Kindle goes to U.S. organizations is certainly not an indication of decrease of American intensity, There are numerous makers in US and Germany, however since the mission of Kindly was to offer items at low value, they were left with no other choice. This reality just shows the high estimation of the American Dollar. In the event that Amazon had made all the required segments for Kindle, at that point the expense of the item would have raised. This would have made it troublesome for Kindle to enter the market. The challenge would have been intense, influencing the organization to settle on a few different systems so as to enter into market.

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

1. Trading securities are at reported on the balance sheet at amortized cost.

True or False?

Answer ______

2. Warranty expense estimates are higher than warranty returns in a given year. This will result in a deferred tax asset.

True or False?

Answer ______

3. An increase in bonds payable is reported in the financing section of the indirect method statement of cash flows.

True or False?

Answer ______

4. A change in accounting estimate should be accounted for in current and future periods.

True or False?

Answer ______

5. Interest revenue on municipal bonds results in a permanent tax difference.

True or False?

Answer ______

6. A component of net periodic post retirement benefit cost is service cost.

True or False?

Answer ______

7. Retained Earnings is increased by the distribution of dividends.

True or False?

Answer ______

8. A change in the useful life of a fixed asset is a change in accounting estimate.

True or False?

Answer ______

The steeper the marginal abatement cost function, the more a firm will reduce emissions in response to a given emission tax.

a.True

b.False

A two-part emission charge

a.would implement a high initial emission charge, then a lower charge for higher levels

b.is implemented when flat charges don’t reduce emission sufficiently

c.may allow a certain level of emissions to go untaxed then taxes emissions above that

d.both of the first two answers are correct

Under an emission charge system, firms will increase abatement as long a the emission charge is greater than the marginal abatement cost.

a.True

b.False

When marginal abatement costs differ across firms, an emissions tax will always achieve a given level of abatement at a lower total abatement cost than a proportionate cutback by all firms.

a.True

b.False

The complication of nonuniform emissions can be addressed by

a.equiproportionate cutbacks in emissions

b.a uniform emissions charge since that would be cost effective

c.zoned emission charges

d.cannot be effectively addressed with emissions charges

One disadvantage of an emissions tax system relative to an emission standard is that the response by firms to the tax, and hence the overall reduction in emissions, is usually not well know in advance of implementing the program.

a.True

b.False

Assuming you worked for a corporation that wanted to increase plant capacity with an estimated cost of $26m, what are some of the options you might suggest to the management to pay for such an expansion? what are the limitations of my question?

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 102,000 units per year is: Direct materials $ 1.70 Direct labor $ 4.00 Variable manufacturing overhead $ 0.70 Fixed manufacturing overhead $ 4.45 Variable selling and administrative expenses $ 1.60 Fixed selling and administrative expenses $ 3.00 The normal selling price is $24.00 per unit. The company’s capacity is 132,000 units per year. An order has been received from a mail-order house for 2,500 units at a special price of $21.00 per unit. This order would not affect regular sales or the company’s total fixed costs.

Required: 1. What is the financial advantage (disadvantage) of accepting the special order?

2. As a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for these units?

Mary Co. sold a machine that cost $78,000 and had a book value of $44,000 for $45,000. Data from Mary's comparative balance sheets are:

Complete the cash flow statement below. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)