
Mr. Don is the director of A-Design Inc., a federally incorporated
company in Canada, specializing in the design and manufacturing of
armrests for the wheelchair industry. A-Design invested $100,000 in a
production machine, which has a useful life of 10 years, and put $10,000 in its bank account.
In an attempt to improve company sales and profits, Mr. Don planned to
offer two purchasing options to the clients of his company.
Option 1:
$250 deposit upfront
$500 yearly fee for 5 years
Option 2:
$1300 deposit upfront
$300 yearly fee for 3 years
Assuming an interest rate of 5% per year compounded monthly over a period of 5 years on the money put in the bank, how much will A-Design have in its bank account at the end of the fifth year?

Step by stepSolved in 2 steps

- Mary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment $ 175,000 Working capital needed $ 185,000 Annual cash inflow from sales $ 190,000 Annual cash outflow for operating costs $ 145,000 Salvage value of equipment $ 20,000 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the annual NET savings?arrow_forwardKryptonite is a telecommunications provider located in Iowa with hundreds of thousands of employees. Their CEO, Clark Klein, is considering the replacement of their expensive Defined Benefit (DB) Pension Plan which requires large contributions every year with a 401(K) where the employees will bear the investment risk. The majority of the workforce is young, and the top executives are all in their 50s and 60s. An intern recommends utilizing a DB/K plan, which is a combination DB and 401(k) plan. What are the pros an cons of this plan in this case?arrow_forwardHarvey quit his job at State University, where he earned $62,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $4,000 a year. To start the business, he cashed in $50,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 10,000 units of software at $72 for each unit. Of the $72 per unit, $60 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.arrow_forward
- Seth Fitch owns a small retail ice cream parlor. He is considering expanding the business and has identified two attractive alternatives. One involves purchasing a machine that would enable Mr. Fitch to offer frozen yogurt to customers. The machine would cost $7,980 and has an expected useful life of three years with no salvage value. Additional annual cash revenues and cash operating expenses associated with selling yogurt are expected to be $6,010 and $840, respectively. Alternatively, Mr. Fitch could purchase for $9,960 the equipment necessary to serve cappuccino. That equipment has an expected useful life of four years and no salvage value. Additional annual cash revenues and cash operating expenses associated with selling cappuccino are expected to be $8,380 and $2,400, respectively. Income before taxes earned by the ice cream parlor is taxed at an effective rate of 20 percent. Required a. Determine the payback period and unadjusted rate of return (use average investment) for each…arrow_forwardSarah and Doug want to set up a company to start a business importing children’s toys from Europe into New Zealand. They will both be directors and equal shareholders. They each pay $500,000 for 100 shares each. The company will have assets (personal property) worth $950,000 and $50,000 in cash reserves. The company will borrow $100,000 from Big Bank to make the first purchase of toys from Europe. The company’s assets do not have any securities registered over them. Which of the following statements are INCORRECT? As the directors of the company, Sarah and Doug are personally liable for the $100,000 debt that the company will incur. The company will carry on existing if either Sarah or Doug retires as a director or sells their shares. The company is a separate legal person and its debts are separate from those owed by Sarah and Doug. Sarah and Doug will be able to issue additional shares and sell them if they want to raise additional funds for their company in the future.arrow_forwardMr. Don is the director of A-Design Inc., a federally incorporated company in Canada, specializing in the design and manufacturing of armrests for the wheelchair industry.A-Design invested $100,000 in aproduction machine, which has auseful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned tooffer two purchasing options to the clients of his company Option 1:$250 deposit upfront$500 yearly fee for 5 years Option 2:$1300 deposit upfront$300 yearly fee for 3 years Assuming an interest rate of 5% per year over a period of 5 years on the moneyput in the bank, how much will A-Design have in its bank account at the end of thefirst year?arrow_forward
- Suppose Clinton decides to use $9,500 currently held as savings to make a financial investment. One method of making a financial investment is the purchase of stock or bonds from a private company. Suppose Arcadia, a biomedical research firm, is selling stocks to raise money for a new lab. This practice is called finance. Buying a share of Arcadia stock would give Clinton the firm. In the event that Arcadia runs into financial difficulty, will be paid first. Suppose Clinton chooses to buy 250 shares of Arcadia stock. Which of the following statements are correct? Check all that apply. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase Arcadia stock. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Clinton's shares to decline. The price of his shares will rise if Arcadia issues additional shares of stock. Alternatively, Clinton could undertake their financial investment by purchasing bonds…arrow_forwardWilliam and Miller Brown run a real estate brokerage firm. They have just moved into a new building and want to add some outdoor digital signage to advertise the firm's services. The sign they are considering has two display areas that can display two different images at the same time and costs $104,800. It is expected to have a useful life of 4 years. In an effort to recoup the cost of the sign, William and Miller will rent one display panel to other tenants in the building for $39,646 a year. Electricity to power the sign is expected to be $870 per year. (a) Calculate the annual net operating income generated by the new sign. Annual net operating income 2$ eTextbook and Mediaarrow_forwardChip and Dale run separate logging companies in the same forest. Both pollute the river flowing through the forest with debris from their work. In the table below, the first row shows the current level of debris that makes its way into the river from their work. The following rows show how much it would cost each logger to reduce its pollution by additional increments of 10 pounds. If the government imposes a pollution tax of $7 for each 10 pounds of debris, total pollution will fall by. pounds, at a total cost of Chip Dale Current debris in pounds 60 80 Cost of reducing debris by 10 pounds $5 $2 Cost of reducing debris by a second 10 pounds $10 $4 Cost of reducing debris by a third $15 $6 10 pounds Cost of reducing debris by a fourth 10 pounds $20 $8 Cost of reducing debris by a fifth $25 $10 10 pounds a) 40, $28arrow_forward
- David and Rita Richardson saved all their married life to open a homestay named T-Lights. They invested RM100,000 of their own money and the corporation issued common stock to them. The business then got a RM100,000 bank loan for the RM200,000 needed to get started. The corporation bought a run-down old colonial home in Ipoh for RM80,000. It cost another RM50,000 to renovate. They found most of the furniture at antique shops and flea markets – total cost was RM20,000. Kitchen equipment cost RM10,000, and a Dell computer set cost RM2,000. Prior to the grand opening, the banker requests a report on their activities thus far. T-Lights’ bank statement shows a cash balance of RM38,000. They feel pretty good with that much net income in only six months. To better understand how well they are doing, they prepare the following statement for presentation to the bank: T-Lights Income Statement Six Months Ended 30 June 2020 Revenues: Investment by owner Bank loan RM100,000 100,000…arrow_forwardTony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2025, for $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500. The following expenditures related to the vehicle were also made on July 1, 2025: The company pays $1,800 to GEICO for a one-year insurance policy. • The company spends an extra $3,000 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. • An additional $2,000 is spent on a deluxe roof rack and a trailer hitch. The painting, roof rack, and hitch are all expected to increase the future benefits of the vehicle for Great Adventures. In addition, on October 22, 2025, the company pays $400 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter. 2. Record the expenditure related to vehicle maintenance on…arrow_forward
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education





