Essay about Pressco Inc

The decision to forgo the production of the cheaper product should also be evaluated in a capital investment cash flow analysis. The management of Prairie Winds will need to consider whether the internal and external side effects of their decisions in the capital budgeting analysis for the product lines. If the side effects increase cash flows of existing assets they are considered compliments, and they are considered substitutes if the side effects negatively effect cash flows.

For the depreciation part, we adopted the straight-line method. Here since the depreciation of year 1984 was $1270, we just assumed all the depreciation amount to be equal to $1270 till the year 1989. With all of these previous assumptions, we obtain the complete pro forma financial statement and the cash flow table for the Collinsville Plant.

1. The first step to evaluating the cash flows is to conduct the depreciation tax flow analysis. Depreciation is not a cash flow, but the depreciation expense lows the taxes payable for the company. As a result, the tax effect of deprecation needs to be calculated as a cash flow. There are two depreciable items on the company's balance sheet the building and the equipment. The equipment is known to have a seven year depreciable life, which will be assumed to be straight line. The building is also assumed to be subject to straight line depreciation, this time of forty years. The tax saving reflects the depreciation expense multiplied by the tax rate, which in this case is assumed to be 28%. The following table illustrates the tax effect in future dollars of the depreciation expense:

Under the Reg. §1.47-3(f) (5) (ii), the transferor of the section 38 property in any taxable year dose not retain a substantial interest in the trade or business directly or indirectly. According to this code, the transferor does not need to make the payment for tax of the interest during the property transaction only if the property can be qualified to “section 38 property” which indicate property (1) with respect to which depreciation is allowable to the taxpayer (2) has an estimated useful life of 3 years or more (3) which is tangible personal property or other tangible property. In this case, the machinery purchased by the individual two years ago can be applied for the “section 38 property” which also means the transferor does not need to pay for the interest happened during the transaction. And because of the gift of stock made by the individual caused a reduction in his interest. Which occurred at a time when the useful lives were just taken into account in computing the credit about the “section 38 property”. Unless his remain interest is a substantial interest, the section 47(b) would no longer be applicable and total

c. Depreciation is computed using the straight-line method over the asset’s estimated useful life, which is determined by asset category as follows: Buildings and improvements (5 – 40 years); Store fixtures and equipment (3 – 15years), Leasehold improvements (Shorter of initial lease term or asset life); Capitalized software (3 – 7 years).

4. Now consider a second alternative for accumulating funds to buy the new billing system. In lieu of a lump sum investment, assume that five annual payments of $32,000 are made at the end of each year.

Commercial Capital Corporation is the leasing subsidiary of a major regional bank and offers a lease at 12.75 million per year for 4 years. The first payment is due upon delivery and installation. The rest of the payments are due each subsequent year at the beginning of the year. This cost includes the same service contract as what would have been obtained with purchase.

-In 1984, there was a switch from accelerated to straight line depreciation retroactively. Because of this, the depreciation expense decreased.

Financial reporting in the recent years through the SEC mandates has become one of the most important aspects to corporate management. Stamford International's problem is inherent in the discrepancy in reporting system and accounting irregularities from the various aspects of the business. Not only has this but Stamford, due to rapid growth not been able to accommodate for the expansionary activities like acquisitions of units and international transactions. The result has been the experience of loss in earnings-per-share. In the following analysis, the researcher thus will outline some of the problems that Stamford should address and resolve accordingly to be able to post a positive quarterly report and remain compliant with the

As opposed to purchasing new equipment, we could opt to maintain the equipment we currently have, which has an estimated service life of 11 years remaining. We could retain all of our claimed Investment Tax Credit for this purchase, which has two years of depreciation left, and would not be required to invest in any new training for our employees. We would recognize $31,000 in depreciation in present value terms, as well as save an estimated $200,000 in training costs and losses due to lower production during the “learning curve”. I estimate these savings to be approximately one month of payroll to include both the time spent on training, and our reduced production as employees learn how to use the new equipment. Additional detail of this option is provided in Appendix B, C, & D.

Brenda Franklin had been serving Allied Tech for the past 8 years. As any other organisations, Brenda used to be a part of the lunch hour conversations with her colleagues. One day when her colleagues were discussing about corruption and politics, something occurred to her. As a result she prepared a list called “Ethically Dubious Conduct” and pasted it on the common notice board. Her colleagues were taken by surprise. Brenda was now anticipating the next lunch where she was expecting her list to be analysed among her colleagues.

1. Assess Interco's financial performance. Why is the company a target of a hostile takeover attempt?

6.The Year 0 net investment outlay for the project is $-475,000. This computed by adding the price of the machinery, installation, shipping, and the change in net working capital. The non-operating cash flow when the project is

The actual production would begin in the third quarter of this year, therefore only half year’s depreciation should be counted on Equipment and IT communication in 2004 (According to Appendix A). The following years (2005-2008) incremental cash flows are computed by the same method. However as the IT equipment and furnishings would be depreciated on a straight line basis over 3 years, thus in year four (2007), there would be only half a year’s deprecation left and after that it will be used up. The last year’s net cash flow in 2009 should be included the extra terminal Value on that year, which includes 24 years’ residual value on building and one year and a half residual value on equipment totaled $2,990,412 with two assumptions of by using residual book values for the building and operating equipment and there will be no further NWS advantage after year 2009. Finally, by obtaining 6 years’ incremental cash-flows and discounting them back to time zero (with the estimate rate of return by 15%) lessing initial cost to get an appealing NPV of $1190528 (Luehrman, p. 3).

iii. “Equipment and Property Under Capital Lease: Flight Equipment” will be reported as $8,869 which is equal to the original present value of the lease ($323) plus the converted amount ($8,546).