Option A Option B $ Net Present Value Which option should be accepted? should be accepted. Profitability Index Internal Rate of Return ** % %
Q: Problem 7-1 Child Tax Credit (LO 7.1) Calculate the total 2021 child and other dependent credit for…
A: Child tax credit in 2021=(children ages 6 through 17)=$3,000 per qualifying child Other dependent…
Q: Time left 0:21:5 Simone Company had no beginning work in process. During the period, 15700 units…
A: Units started into production=Units completed during the period+Units in ending work in…
Q: Diego Company manufactures one product that is sold for $77 per unit in two geographic regions—the…
A: Using absorption Costing, both variable and fixed manufacturing cost are included in the product…
Q: Prepare the entries for transaction below and indicate what journal it is 2 Aug business sold…
A: Journal entries are used to record the financial transactions in the books of accounts. It is the…
Q: Prepare the entries for transaction below and indicate what journal it is 3 august paid $200 for…
A: Freight is the amount of shipping charges paid on the inventory purchased. If cash is paid for this…
Q: Tanisha is to receive 25% of the profits from partnership Plumeria Designs, before taking into…
A: Guaranteed Profit - If any partner is supported with minimum share in profit of the partnership…
Q: Botosan Factory has budgeted factory overhead for the year at $13,500,000, and budgeted direct labor…
A: Introduction:- The following formula used to calculate Actual factory overhead applied as follows…
Q: On December 31, 2017, Zero Co. showed the following shareholders' equity: Share capital, P100 par,…
A: The dividend is declared from the retained earnings of the business. The dividend is paid only for…
Q: Problem 7-6 Earned Income Credit (LO 7.2) Diane is a single taxpayer who qualifies for the earned…
A: Here discuss about the Calculation of Earned Income Credit using Earned Income Credit Table which…
Q: C10.58 Solid State sells electronic products. The controller is responsible for preparing the master…
A: Disbursement is a term generally referred by banks wherein after loan is sanctioned actual…
Q: Julio produces two types of calculator, standard and deluxe. The company is currently using a…
A: The traditional method of costing uses a single cost pool to allocate the entire overhead cost…
Q: Required information [The following information applies to the questions displayed below.] On July…
A: The depletion expense is charged on natural resources such as mineral, ores, etc. The depreciation…
Q: Prepare the entries for transaction below and indicate what journal it is 9 August purchased…
A: The purchase journal is a journal used to record financial transactions related to credit purchases…
Q: Line following information applies to the questions displayed below. Carlberg Company has two…
A: The equivalent units are calculated on the basis of percentage of the work completed during the…
Q: Calculate the gross profit using: 3.1. FIFO method (10) 3.2. Weighted average method (10)
A:
Q: Tammy donates organization Wh WH
A:
Q: K Ruby Company, Inc. has the following budgeted sale Month: April May Units 3,700 3,900 Inventory of…
A: Number of units to be sold in a month = Opening inventory units + Purchases/units produced during…
Q: Land and buildings 114 000 Equipment 210 000 Investment (80 000 shares of £1 each in Rhythm Ltd at…
A: Ratio Analysis : Ratio analysis is the numerical relation among the items of the financial…
Q: Cornelius Company produces women’s clothing. During the year, the company incurred the following…
A: The cost of goods manufactured includes total production costs such as direct material consumed,…
Q: Siew Chin purchased her first investment property on 1 April 2021. Her first tenant moved in on 1…
A:
Q: Helix Corporation uses the weighted-average method in its process costing system. It produces…
A: Weighted average method is one the methods used for the determining the cost of goods transferred…
Q: Which statement is true? Multiple Choice ___ The larger the standard deviation, the lower the…
A: Standard deviation :— Standard Deviations is a basic mathematical concepts that measures volatility…
Q: Managers should pay little attention to bottleneck operations since they have limited capacity for…
A: In case of company manager play an important role in order to run the company and perform their…
Q: Whispering Winds Corporation began operations on April 1 by issuing 59,500 shares of $5 par value…
A: Journal Entry: Journal entry is the act of keeping records of transactions in an accounting journal.…
Q: Diego Company manufactures one product that is sold for $77 per unit in two geographic regions—the…
A: Solution 10: Variable costing net operating income = Sales - Variable Costs - Fixed Costs Sales -…
Q: Record the journal entries for the month of July. Post the July journal entries into your general…
A: Journal Entries Date General journal Debit ($) Credit ($) 1-Jul-20 Cash 5,300…
Q: QS 13-8 Issuance of common shares LO³ On February 1, Excel Corporation issued 37,500 common shares…
A: Introduction Issuance of common share: Common shares are offered to business owners and other…
Q: The following balances were obtained from the books of Tim Curry plc as at December 31,…
A: An income statement is a financial report that indicates the revenue and expenses of a business. It…
Q: The partnership agreement of Jones, King, and Lane provides for the annual allocation of the…
A: >Partnership Income (Loss) is allocated based on the partnership agreement. >The Net…
Q: Pablo Company is considering buying a machine that will yield income of $3,300 and net cash flow of…
A: Net present value is the net amount of total cash outflow and net cash inflows discounted at the…
Q: Requirement 2: (a)Calculate the IRR. (Do not include the per cent sign (%). Round your answers to 2…
A: The net present value is used when there are a series of cash flows. The Net Present Value is…
Q: A civil engineer who owns his own design/build/operate company purchased a small crane 3 years ago…
A: Replacement analysis is the process by which the various costs consequences involved are studied so…
Q: Long-term debt adjustments for government-wide financial statements Sai-Tu Village reported…
A: The journal entry represents the business transactions recorded in the accounting records. The…
Q: Pedro Co purchased a bond investment in Juan Company. The following are the data pertaining to…
A: Amortized Cost Financial assets is reported on a balance sheet at their amortized value ,which is…
Q: Campbell Company has fixed costs of $200,000, sales price of $50, and variable cost of $30 per unit.…
A: To earn a target profit of $50,000, Campbell must earn a contribution margin of $250,000…
Q: e balance sheet have in respect to evaluating the health of the firm?
A: Balance sheet of the firm shows the overall financial position of the company and show how much are…
Q: d) Payables payment period in days e) Number of days inventory on hand 2. Analyse and interpret…
A: Ratio Analysis The purpose pre preparing the Ratio analysis which indicating the strength and…
Q: d. Margin Calculation (Net Margin amount pp = Add PP net costs and margin to get - Final Net Selling…
A: In the context of the given question, we are required to compute the margin and retail travel agent…
Q: Dukelow Corporation has two divisions: the Governmental Products Division and the Export Products…
A: Income statement: Income statement is the financial statement which shows the financial performace…
Q: QS 13-9 Interpreting journal entries for share issuances LO³ Each of these entries was recently…
A: Lets understand the basics. Journal entry is required to make to record event and transaction that…
Q: nalysts pay so much attention to the Statements of Cash Flows versus the Income Statement?
A: Income statement shows the profit and loss over the period after deductions of expenses from the…
Q: The following balances were obtained from the books of Tim Curry plc as at December 31,…
A: An income statement is a financial report that indicates the revenue and expenses of a business. It…
Q: LaPlante Inc. has a profit margin of 14% and an investment turnover of 2. Sales revenue is $800,000.…
A: The investment turnover ratio compares the revenue received to its equity and debt. The ratio is…
Q: Andy owns a Candy factory with noisy machines which disturb his neighbor Barb. Andy profits from…
A:
Q: Standard Materials 6 unit $ 2 per unit Labor 1/4 hour 8 per hour Variable factory overhead 3/4 hour…
A: Introduction: A journal entry is documentation of a commercial transaction in a company's accounting…
Q: Unearned service revenue 149 Common stock 266 Retained earnings 8060 Service revenue…
A: Net Income For the Year :— It is Revenue minus expenses of the year. Net Income = Revenue — Expenses…
Q: Required Use the following information to prepare a classified balance sheet for Alpha Co. at the…
A: Balance Sheet is the financial statement that represents all the assets, liabilities and…
Q: Which of the follow is true regarding corporate and U.S. Treasury bonds purchased at a discount?…
A: Corporate bonds are also debt securities issued by corporations. Like treasury bonds, corporate…
Q: Redlands Inc. made the following investments on January 1, 2020, its first year of business: Item…
A: Depreciation Expenses There are different method which are applicable for calculation of…
Q: a. If total liquidation proceeds are $5.425 million, what is the distribution of these proceeds…
A: a. If Total Liquidation Proceeds are $5.425 million
Step by step
Solved in 2 steps with 2 images
- Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?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?
- You are also considering another project that has a physical life of 3 years—that is, the machinery will be totally worn out after 3 years. However, if the project were terminated prior to the end of 3 years, the machinery would have a positive salvage value. Here are the project’s estimated cash flows: Using the 10% cost of capital, what is the project’s NPV if it is operated for the full 3 years? Would the NPV change if the company planned to terminate the project at the end of Year 2? At the end of Year 1? What is the project’s optimal (economic) life?Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?
- A mini-mart needs a new freezer and the initial Investment will cost $300,000. Incremental revenues, including cost savings, are $200,000, and incremental expenses, including depreciation, are $125,000. There is no salvage value. What is the accounting rate of return (ARR)?San Lucas Corporation is considering investment in robotic machinery based upon the following estimates: a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 700,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter. b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 500,000, 700,000, and 900,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar. d. Interpret the results of parts (a), (b), and (c).The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?
- Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000, with annual net cash flows of $9,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether or not you would recommend that Ham and Egg invest in this oven.Mallette Manufacturing, Inc., produces washing machines, dryers, and dishwashers. Because of increasing competition, Mallette is considering investing in an automated manufacturing system. Since competition is most keen for dishwashers, the production process for this line has been selected for initial evaluation. The automated system for the dishwasher line would replace an existing system (purchased one year ago for 6 million). Although the existing system will be fully depreciated in nine years, it is expected to last another 10 years. The automated system would also have a useful life of 10 years. The existing system is capable of producing 100,000 dishwashers per year. Sales and production data using the existing system are provided by the Accounting Department: All cash expenses with the exception of depreciation, which is 6 per unit. The existing equipment is being depreciated using straight-line with no salvage value considered. The automated system will cost 34 million to purchase, plus an estimated 20 million in software and implementation. (Assume that all investment outlays occur at the beginning of the first year.) If the automated equipment is purchased, the old equipment can be sold for 3 million. The automated system will require fewer parts for production and will produce with less waste. Because of this, the direct material cost per unit will be reduced by 25 percent. Automation will also require fewer support activities, and as a consequence, volume-related overhead will be reduced by 4 per unit and direct fixed overhead (other than depreciation) by 17 per unit. Direct labor is reduced by 60 percent. Assume, for simplicity, that the new investment will be depreciated on a pure straight-line basis for tax purposes with no salvage value. Ignore the half-life convention. The firms cost of capital is 12 percent, but management chooses to use 20 percent as the required rate of return for evaluation of investments. The combined federal and state tax rate is 40 percent. Required: 1. Compute the net present value for the old system and the automated system. Which system would the company choose? 2. Repeat the net present value analysis of Requirement 1, using 12 percent as the discount rate. 3. Upon seeing the projected sales for the old system, the marketing manager commented: Sales of 100,000 units per year cannot be maintained in the current competitive environment for more than one year unless we buy the automated system. The automated system will allow us to compete on the basis of quality and lead time. If we keep the old system, our sales will drop by 10,000 units per year. Repeat the net present value analysis, using this new information and a 12 percent discount rate. 4. An industrial engineer for Mallette noticed that salvage value for the automated equipment had not been included in the analysis. He estimated that the equipment could be sold for 4 million at the end of 10 years. He also estimated that the equipment of the old system would have no salvage value at the end of 10 years. Repeat the net present value analysis using this information, the information in Requirement 3, and a 12 percent discount rate. 5. Given the outcomes of the previous four requirements, comment on the importance of providing accurate inputs for assessing investments in automated manufacturing systems.