Required: a. Veach computes ROI using beginning-of-the-year asset? net assets. What will the divisional ROI be for year 1 assuming Veach retains the b. What would divisional ROI be for year 1 assuming Veach disposes of the asset for its book value and there is no gain or loss on the sale? Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1). c. Veach computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Veach retains the asset? d. What would divisional residual income be for year 1 assuming Veach disposes of the asset for its book value and there is no gain or loss on the sale?
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- Harbor Division has total assets (net of accumulated depreciation) of $645,000 at the beginning of year 1. Harbor also leases a machine for $22,000 annually. Expected divisional income in year 1 is $84,000 including $5,400 in income generated by the leased machine (after the lease payment). Harbor's cost of capital is 11 percent. Harbor can cancel the lease on the machine without penalty at any time and is considering disposing of it today (the beginning of year 1). Required: a. Harbor computes ROI using beginning-of-the-year net assets. What will the divislonal ROI be for year 1 assuming Harbor retains the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) b. What would divisional ROI be for year 1 assuming Harbor disposes of the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for…Harbor Division has total assets (net of accumulated depreciation) of $674,000 at the beginning of year 1. Harbor also leases a machine for $23,000 annually. Expected divisional income in year 1 is $81,000 including $5,800 in income generated by the leased machine (after the lease payment). Harbor's cost of capital is 9 percent. Harbor can cancel the lease on the machine without penalty at any time and is considering disposing of it today (the beginning of year 1). Required: a. Harbor computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) b. What would divisional ROI be for year 1 assuming Harbor disposes of the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for…Harbor Division has total assets (net of accumulated depreciation) of $542,000 at the beginning of year 1. Harbor also leases a machine for $23,000 annually. Expected divisional income in year 1 is $81,000 including $5,500 in income generated by the leased machine (after the lease payment). Harbor’s cost of capital is 10 percent. Harbor can cancel the lease on the machine without penalty at any time and is considering disposing of it today (the beginning of year 1). Required: a. Harbor computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) b. What would divisional ROI be for year 1 assuming Harbor disposes of the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for…
- The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $48.0 million and having a four-year expected life, after which the assets can be salvaged for $9.6 million. In addition, the division has $48.0 million in assets that are not depreciable. After four years, the division will have $48.0 million available from these nondepreciable assets. This means that the division has invested $96.0 million in assets with a salvage value of $57.6 million. Annual depreciation is $9.6 million. Annual operating cash flows are $20.6 million. In computing ROI, this division uses end-of-year asset values in the denominator. Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. Required: a. & b. Compute ROI, using net book value and gross book value for each year. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).) Answer is complete but not entirely correct. ROI Year…Intella Manufacturing, Inc. has only one plant asset used in production. The asset had a cost of $535,000 and has been depreciated for 2 full years since the date of acquisition. This accounting resulted in a total accumulated depreciation of $220,000. The firm expects the asset to be productive for an additional 3 years and projects the asset's future cash flows to be $132,000 per year. Information about the company's products indicates that the asset might be impaired. Should the firm record an impairment loss for the current year? (Provide supporting computations.) First, calculate the carrying value of the asset using the table below. Less: Carrying value of asset Part 2 Next, conduct an impairment test for the asset using the table below. Step 1: Asset Impairment indicatedVeach Division has total assets (net of accumulated depreciation) of $462,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $42,000. Now, assume that Veach has been leasing this machine for $7,200 annually. Expected divisional income in year 1 is $55,440 including $2,940 in income generated by the leased machine (after the lease payment). Veach's cost of capital is 10 percent. Veach can cancel the lease on the machine without penalty at any time. Required: a. Veach computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Veach retains the lease on the machine? Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1). b. What would divisional ROI be for year 1 assuming Veach cancels the lease on the machine? Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1). c. Veach computes residual income using beginning-of-the-year net assets. What will the…
- At the beginning of last year, Bratworth Corporation purchased a piece of heavyequipment for $99,000. The equipment has a life of five years or 100,000 hours. The estimatedresidual value is $9,000. Bratworth used the equipment for 21,000 hours last year and 27,000hours this year. Depreciation expense for year two using double-declining-balance (DDB) andunits-of-production methods would be as follows:DDB UOPa. $23,760 $26,730b. $21,600 $26,730c. $21,600 $24,300d. $23,760 $24,300On December 31, 2020, Riverbed Inc. has a machine with a book value of $1,410,000. The original cost and related accumulated depreciation at this date are as follows. Machine $1,950,000 Less: Accumulated depreciation 540,000 Book value $1,410,000 Depreciation is computed at $90,000 per year on a straight-line basis. Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal. (a) Your answer is correct. A fire completely destroys the machine on August 31, 2021. An insurance settlement of $645,000 was received for this casualty. Assume the settlement was received immediately. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and…A company bought land one year prior to start-up for 100,000$. Total capital investment spent at the start up excluding the land cost was 1 million $ of which 80% was fixed capital investment. Product cost except depreciation was 200,000$. Assume all fixed capital investment can be depreciable with straight line for 10 years of life of the project. After 10 years all depreciable items can be sold for 50,000$. If the capacity of the plant is 100,000 unit/year, present value of the investment is 800,000$, determine the price of the product. (tax rate is 20%, i=0.05
- On December 31, 2020, Riverbed Inc. has a machine with a book value of $ 1,410,000. The original cost and related accumulated depreciation at this date are as follows. Machine $1,950,000 Less: Accumulated depreciation 540,000 Book value $ 1,410,000 Depreciation is computed at $ 90,000 per year on a straight-line basis. Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal. (a) A fire completely destroys the machine on August 31, 2021. An insurance settlement of $ 645,000 was received for this casualty. Assume the settlement was received immediately. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit…At the beginning of Year 1, Ithaca Incorporated purchased land for $1,500,000 from which it expects to extract 800,000 tons of minerals. The estimated residual value is $250,000. What is Ithaca's unit depletion rate? Round your answer to two decimal places.A company is considering the purchase of a capital asset for $120,000.Installation charges needed to make the asset serviceable will total $25,000. The asset will be depreciated over six years using the straight-line method and an estimated salvage value (SV6) of $22,000. The asset will be kept in service for six years, after which it will be sold for $27,000. During its useful life, it is estimated that the asset will produce annual revenues of $25,000. Operating and maintenance (O&M) costs are estimated to be $5,000 in the first year. These O&M costs are projected to increase by $500 per year each year thereafter. The after tax MARR is 15% and the effective tax rate is 25%. a. Compute the after-tax cash flows. b. Compute the after-tax present worth of the project, and use a uniform gradient in your formulation. c. The before-tax present worth of this asset is −$72,738. By how much would the annual revenues have to increase to make the purchase of this asset…