Danube has a factory which it bought 3 years ago for estimated at zero and the useful life was estimated at 20 years. At the beginning of the current year (year 4), the product produced in this factory was the subject of a significant health scare. Like for like sales have declined by 20% per month. The management estimate that the factory is now only worth 10% of the net book amoun the end of year 3 and an impairment expense is necessary. How much is the factory impairment in year 4? Select one: O 583,236.0 O 518,432.0 O 686,160.0 O 548,928.0
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- St. Johns River Shipyards welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost 182,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from 27,000 to 74,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 12%. What is the NPV if the firm replaces the old welder with the new one?Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?Poleski Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year: The selling price of Poleskis single product is 16. In recent years, profits have fallen and Poleskis management is now considering a number of alternatives. Poleski wants to have a net income next year of 250,000, but expects to sell only 120,000 units unless some changes are made. The president of Poleski has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Poleskis contribution margin per unit, contribution margin ratio, and break-even point for next year. The worksheet CVP has been provided to assist you. Note that the data from the problem have already been entered into the Data Section of the worksheet.
- Midwest Manufacturing has had to downsize by about 25%. As a result, one of its warehouses is cur- rently unused. Insurance, security, and minimal heat- ing and lighting cost $170,000 per year. When it was in use, the facility costs for these items and normal maintenance were $425,000 per year. The building and land are valued at $3M. Midwest expects to begin using the warehouse again in 4 years. Another firm wants to lease the warehouse for 5 years with an option to renew. If Midwest uses an interest rate of 10%, what should the Midwest charge the firm? The firm will pay all costs for insurance, security, heating, lighting, and maintenance. If needed, Midwest can lease or build another warehouse for equivalent costs.A company is planning to purchase a machine that will cost $70,308, have a six-year life, and will have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine? Sales $ 243,000 Costs: Manufacturing $ 145,800 Depreciation on machine 4,000 Selling and administrative expenses 81,000 (230,800) Income $ 12,200 Multiple Choice 13.02 years. 6.51 years. 1.09 year. 26.04 years. 4.34 years.Macintosh Printing, Inc., purchased a $20,000 printing machine two years ago. The company expected this machine to have a seven-year life and a salvage value of $5,000. The company spent $5,000 last year on repairs, and current operating costs are running at the rate of $8,000 per year. Furthermore, the anticipated salvage value of the machine has been reduced to $2,500 at the end of its useful life. In addition, the company has found that the machine has a current market value of $10,000.A sales person offers a new printing machine for $18,000 with a useful life of 5 years. This new printer has no salvage value. The maintenance expenses of the new printer is $6,000 annually. The company’s MARR is 12%.a) Using Insider’s point of view, analyze if the replacement needs to be made.b) If the useful life of the new machine is 6 years, conduct the replacement analysis. Has the decision changed from the previous scenario? Justify.
- A company is planning to purchase a machine that will cost $34,800, will have a six-year life, and will have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine? Sales $ 105,000 Costs: Manufacturing $ 51,200 Depreciation on machine 5,800 Selling and administrative expenses 45,000 (102,000) Income $ 3,000A company is planning to purchase a machine that will cost $34,800, will have a six-year life, and will have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine? Sales $ 105,000 Costs: Manufacturing $ 51,200 Depreciation on machine 5,800 Selling and administrative expenses 45,000 (102,000) Income $ 3,000 Question 17Select one: a. 25.29% b. 8.62% c. 51.72% d. 5.17%A company is currently producing chemical compounds by a process installed 10 years ago at a cost of $100,000. It was assumed that the process would have a 20-year life with a zero salvage value. The current market value of the equipment, however, is $60,000, and the initial estimate of its economic life is still good. The annual operating costs associated with this process are $18,000. A sales representative from U.S. Instrument Company is trying to sell a new chemicalcompound- making process to the company. This new process will cost $200,000 have a service life of IO years with a salvage value of $20,000, and reduce annual operating costs to $4,000. Assuming the company desires a return of 12% on all investments, should it invest in the new process?
- Turner Container Company is suffering declining sales of its principal product, non-biodegradable plastic cartons. The president, Robert Griffin, instructs his controller, Alexis Landrum, to lengthen asset lives to reduce depreciation expense. A processing line of automated plastic extruding equipment, purchased for $3.5 million in January 2020, was originally estimated to have a useful life of 8 years and a salvage value of $300,000. Depreciation has been recorded for 2 years on that basis. Robert wants the estimated life changed to 12 years total, and the straight-line method continued. Alexis is hesitant to make the change, to increase net income in this manner. Robert says, “Hey, the life is only an estimate, and I've heard that our competition uses a 12-year life on their production equipment.” a. Why would Alexis be hesitant to make such a change?b. Is it simply a good business practice by an astute president or is there something more?c. What role does estimates play in…On January 1, 1990, Alamo Steel Company purchased three used delivery trucks at a total cost of P630,000. Before placing the trucks in service, the company spent P22,000 painting them, P8,000 replacing their tires, and P40,000 overhauling their engines and reconditioning their bodies. Alamo management estimates that the trucks will remain in service for six years and have a residual value of P160,000. The trucks’ combined annual mileage is expected to be 18,000 miles in each of the first 4 years and 14,000 miles in each of the next two years. a) Prepare a depreciation schedule using double declining balance and using service output method b) What is the book value of the trucks at the end of 1993 using the straight line method.On April 1, 2014, the company incurred capital cost of $100 million in respect of themine and it is expected that the mine will be abandoned in eight years’ time.The mine is situated in a country where there is no environmental legislationobliging companies to rectify environmental damage and is it very unlikely that anysuch legislation will be enacted within eight years.It has been estimated that the cost of cleaning the site and re-planting the treeswill be $25 million if the replanting were successful at the first attempt, but it willprobably be necessary to make a further attempt, which will increase the cost by afurther $5 million. The company’s cost of capital is 10%. Explain why a provision should be made for the cost of cleaning the site.