Worksheet Assignment # 5
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WORKSHEET ASSIGNMENT # 5
Depreciation & Capital Budgeting (9 points)
Due by Monday, November 13
th
, 11:59 pm (PT)
Instructions
Answer the questions in this worksheet as you attend the lectures. The questions on this worksheet are usually the same questions the class is answering during the lecture, so you will have the opportunity to work along with the lecture during class time. Upload the worksheet on Canvas when you have completed the questions. You will get a full answer sheet to check your working as soon as you upload your worksheet. You can keep this worksheet for yourself and use it to study for the exam or when completing the homework assignments.
Grading
You will receive full grades so long as you make a genuine attempt to answer
the questions. A genuine attempt means that you must demonstrate that you have attended the lectures related to this particular worksheet.
Given that the same questions are being answered during the lectures, your responses should reflect what is covered and provided in the lectures. Whenever calculations are required, you must show your working. Points will be deducted if you only give the final answer without showing your working regardless of giving the correct answer. So long as you make a genuine attempt (as explained above), points will not be automatically deducted when some of your responses are incorrect. Think
of this as a chance to practice your new knowledge... and have fun! After you submit your worksheet, you will receive the correct answers in an announcement on Canvas. Make sure to compare your responses with the answer sheet to check your understanding of the material. Questions - DEPRECIATION
1.
WSU’s athletic department purchased a new van for $30,000. They expect to sell it in 3 years for $4,000. What is the annual depreciation expense and annual tax saving if the marginal tax rate is 10%, when using:
a.
Straight-line depreciation
Year
Depreciation Expense
Cost Remaining
Tax Saving
1
($30,000-
$4,000)/3 $30,000-$8,667 =$21,333
$8,667*10%= $866.70
SPMGT 374
1
=$8,667
2
($30,000-$4,000)
/3 = $8,667
$21,333 - $8,667
= $12,666
$8,667*10%= $866.70
3
($30,000-$4,000)
/3 = $8,667
$12,666 - $8,667
= $3,999
$8,667*10%= $866.70
b.
Double declining balance depreciation
Year
SL%
DDB%
Depreciatio
n Expense
Cost
Remaining
Tax Saving
1
100%/3 = 33.3%
0.33 * 2 = 67%
67% *$26,000 =
$17,333.33
$30,000 – $17,333.33 = $12,666.67
$17,333 * 10% = $1,733.30
2
100%/3 = 33.3%
0.33 * 2 = 67%
67% (26,000 – 17,333.33) = $ 5,806.67
$12,666.67 -
$5,806.67 =
$6,860
$5,807 * 10% = $580.70
3
100%/3 = 33.3%
0.33 * 2 = 67%
67% ($ 26,000 – (17,333.33 + 5,806.67)) = $1,916.20
$6,860 - $1,916.20 =
$4,943.80
$580.70 * 10% = $191.60
Questions – CAPITAL BUDGETING
1.
Your gym is evaluating a project to install televisions in the workout area. The gym will install 6 televisions that have a sticker price of $200
each. Delivery for 6 televisions is $50. An electrician is required to install them for around $350. What is the initial cost of the project?
$200 (6) + $50 +$350= $1600
SPMGT 374
2
2.
This year, revenues from gym memberships were $20,000. Memberships have been growing 6% per year, which is expected to continue into the future. However, the new televisions are expected to increase membership growth to 8% per year. Moreover, advertising time will be sold on the televisions for a total $10,000 a year. The televisions can be depreciated using straight-line depreciation for 5 years with no resale value. Use a 21% tax rate. What is the incremental cash flow for the first year of the project?
ICF= estimated net earnings with a television
$20,000*8%= ($1600+$20,000+$10,000) = $31,600
Estimated net earning without a television
$20,000*6%= ($1200+$20,000+$21,200) = $21,200
$31,600-$21,200= $10,400
Depreciation expenses $1,200/5=$240
Tax Benefits $240*21%=$50.40
ICF
$10,400+50.40=$10,450.40
3.
Project B has an initial cost of $1,000. Incremental cash flows are estimated to be $200 in Year 1 and $300, $400, $500 in subsequent years. Your firm’s maximum acceptable payback period is 3 years. As the finance manager in charge of this project, should you accept it into your department’s capital budget?
SPMGT 374
3
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- P 00 it View History Bookmarks Window Help 00 A ezto.mheducation.com nt Portal Course Modules: Budgeting and Forecasting 62211 Week 4: Homework Question 3 - Week 4: Homework - Co omework G Saved Help Save & Exit Submit Check my work Information pertaining to Noskey Corporation's sales revenue follows: November 2021 (Actual) $ 180,000 December 2021 (Budgeted) $ 160,000 500,000 January 2022 (Budgeted) Cash sales 000'09 $ 540,000 Credit sales $ 360,000 000'09 Total sales 000'099 2$ Management estimates 5% of credit sales to be uncollectible. Of collectible credit sales, 60% is collected in the month of sale and the remainder in the month following the month of sale. Purchases of inventory each month include 70% of the next month's projected total sales (stated at cost) plus 30% of projected sales for the current month (stated at cost). All inventory purchases are on-account; 25% is paid in the month of purchase, and the remainder is paid in the month following the month of purchase.…arrow_forwardEat min C e New tab Λ Content xW Quiz 3-MAT-143, section 03F, Fa X + Q A ✩ https://www.webassign.net/web/Student/Assignment-Responses/last?dep=34832472 Viewing Saved Work Revert to Last Response DETAILS MY NOTES You deposit $850 in an account paying an annual simple interest rate of 7.8%. Find the future value of the investment (in dollars) after 1 year. DETAILS MY NOTES Calculate the simple interest due (in dollars) on a 40-day loan of $1,600 if the annual interest rate is 9%. (Use 360 days in 1 year.) $ DETAILS MY NOTESarrow_forwardcements Unit Study Plan Coursework Learning Activities NUNAVUT PAYROLL TAX SCENARIO Patricia Clark, the Human Resources Manager of your Northern Expeditions company, has advised that the company will be opening an office in Nunavut this year. The office will offer guided northern trips to hunters and adventurers. It expects to mainly employ local guides (40 days over the summer period) but the company will also be periodically bringing in guides from its offices in Alberta, Saskatchewan and Québec. Some of the guides from outside Nunavut may work 10 days, others could work 15 days over the summer depending on the number of bookings; they normally work in their home province for 60 days every year. The average daily rate paid to these guides is $400. Patricia is asking for information on the Nunavut Payroll Tax. Who pays the tax and how is it calculated? Are there any special considerations or challenges for the calculation of the payroll tax for the guides brought in from Alberta,…arrow_forward
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