Q1 (a). Your management is interested in taking over a similar business and has handed over to youthe published accounts of the firm for the last three years. As the financial analyst, What analysis youwould look into before making any decisions?Q1 (b). Mukund Iron Company is considering to install:New Machinery which cost Rs. 1,00,000. TheMachine has a life of 5 Years and has no Scrap value at the end of life. The company's tax rate is40% and uses straight line balance method for depreciation. The earnings before depreciation and taxwill be as below:EBITD&A (in Rs.)22,000Year122,00028.00030.00050,00034.5You are required to calculate-i) Pay back Period(ii) NPV at 10% and 12% discount rate.

Net present value (NPV) is the difference between the present value of cash inflows and the present…

Answered: Q1 (a). Your management is interested…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 12.1.2P

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The firm is formed to purchase and operate a vehicle. The purpose of the vehicle is to operate a taxi service for one year. The life of the vehicle is only one year, after which time the vehicle is worthless. The debt will be repaid with interest and the firm will be shut down and capital returned to shareholder at year end. The firm is contemplating the following: Vehicle acquisition cost                                                     $ 30,000 Years of useful life (economic life)                                      1 Tax rate                                                                             20% Required rate of return on equity                                    10% Required return on debt                                                     5% Debt ratio                                                                          50% Annual revenues                                                         $ 145,000 Operating expenses (excluding depreciation)…
The firm is formed to purchase and operate a vehicle. The purpose of the vehicle is to operate a taxi service for one year. The life of the vehicle is only one year, after which time the vehicle is worthless. The debt will be repaid with interest and the firm will be shut down and capital returned to shareholder at year end. The firm is contemplating the following: Vehicle acquisition cost                                                     $ 30,000 Years of useful life (economic life)                                      1 Tax rate                                                                             20% Required rate of return on equity                                    10% Required return on debt                                                     5% Debt ratio                                                                          50% Annual revenues                                                         $ 145,000 Operating expenses (excluding depreciation)…
The firm is formed to purchase and operate a vehicle. The purpose of the vehicle is to operate a taxi service for one year. The life of the vehicle is only one year, after which time the vehicle is worthless. The debt will be repaid with interest and the firm will be shut down and capital returned to shareholder at year end. The firm is contemplating the following: Vehicle acquisition cost                                                     $ 30,000 Years of useful life (economic life)                                      1 Tax rate                                                                             20% Required rate of return on equity                                    10% Required return on debt                                                     5% Debt ratio                                                                          50% Annual revenues                                                         $ 145,000 Operating expenses (excluding depreciation)…
The firm is formed to purchase and operate a vehicle. The purpose of the vehicle is to operate a taxi service for one year. The life of the vehicle is only one year, after which time the vehicle is worthless. The debt will be repaid with interest and the firm will be shut down and capital returned to shareholder at year end. The firm is contemplating the following: Vehicle acquisition cost $ 30,000 Years of useful life (economic life) 1 Tax rate 20% Required rate of return on equity 10% Required return on debt 5% Debt ratio 50% Annual revenues $ 145,000 Operating expenses (excluding depreciation)…
The firm is formed to purchase and operate a vehicle. The purpose of the vehicle is to operate a taxi service for one year. The life of the vehicle is only one year, after which time the vehicle is worthless. The debt will be repaid with interest and the firm will be shut down and capital returned to shareholder at year end. The firm is contemplating the following: Vehicle acquisition cost $ 30,000 Years of useful life (economic life) 1 Tax rate 20% Required rate of return on equity 10% Required return on debt 5% Debt ratio 50% Annual revenues $ 145,000 Operating expenses (excluding depreciation)…
2.-DO IT IN EXCEL, AND SHOW THE FORMULASIf the company purchases the machine, its cost of $276,000 will be financed with a loan at 14.8% interest for three years requiring equal annual payments including principal and interest. The machine will be depreciated at 20% per year. The company will pay $8,000 per year for maintenance services. The company plans to keep the machine even after its payback period.What is the amount of the annual payment? A) $120,480.90 B) $85,442.71 C) $276,000.00 D) $361,442.71 (Choose one option)
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