Q: debt of $124,500.00 due 7 years from now if interest is 2.59% compounded semi- annually? Round all…
A: Future value is a value received in a future period after adding interest as per the particular…
Q: Formulate but do not solve the problem. Kelly Fisher invested a total of $20,000 in two municipal…
A: Bonds are debt instruments that carry a fixed rate of interest. The interest is the income earned…
Q: A European candy manufacturing plant manager must select a new irradiation system to ensure the…
A: The process through which an entity/individual analyze and evaluate a project/investment's…
Q: Karen’s Diner has provided the following financial information: cash and marketable securities =…
A: Working capital is the amount of capital or funds to be used in day to day operations in business.…
Q: Morgan Weatherspoon, a super salesman contemplating retirement on his fifty-fifth birthday, decides…
A: Formula = Marginal contribution to the fund = Balance of fund / cumulative FV value The balance…
Q: Consider two assets with expected return R1=0.22,R2=0.55and variance are s1=0.80, s2=0.88 and…
A: Portfolio is combination of stocks in the portfolio and risk and return of portfolio depends on the…
Q: You plan on retiring in 25 years. In order to increase your retirement income, you open a…
A:
Q: (c) Use the graph to estimate the amount of the mortgage. $ 300000 x
A: As mentioned in the question equity is the total amount paid in the home. It can also be said as…
Q: Question 2 A father deposited unknown lump-sum amounts into an investment opportunity per year…
A: The concept of money's time value indicates that any sum of money currently is worth more as…
Q: Your friend told you about an NFT (Non-fungible Token) that they think will be worth $7.5 in 5.8…
A: Present value An investor or the owner of debt instruments, which are frequently issued by…
Q: The finance director of Netra co wishes to estimate what impact the introduction of debt finance is…
A: Modigliani and Miller's approach states that the capital structure of a firm does not affect the…
Q: Consider a financial institution whose asset and liability both consist of coupon bonds only. The…
A: a) Market values: Asset: Price = FV / (1 + yield/2)^(number of coupon payments) = 100 / (1 +…
Q: Find Operating Cash Flow (OCF) annually first ten years and terminal phase, with the following…
A: The Operating Cash Flow (OCF) for the first ten years and terminal phase can be calculated as…
Q: Two payments of $16,000 and $2,500 are due in 1 year and 2 years, respectively. Calculate the two…
A: Answer Interest Yearly 10.5% Compound Quarterly Quarterly Interest Rate 10.5%/4 2.63%…
Q: Owen's Electronics has nine operating plants in seven southwestern states. Sales for last year were…
A: New funds refer to the funds that the company generates for financing requirements. There are…
Q: What's the rate of return you would earn if you paid $2,880 for a perpetuity that pays $65 per year?…
A: Perpetuity is a type of payment at the regular intervals which is likely to continue forever. It is…
Q: A constant perpetuity with cash flow, C, will have the first cash flow occur exactly 17 years from…
A: The worth of the cash flows at the current point of time that will occur in future is called the…
Q: Assume you can earn 9.4% per year on your investments. a. If you invest $170,000 for retirement at…
A: STEP 1 A current asset's future value which is based on an estimated rate of growth is its value at…
Q: What is the present value of a cash payment of $1.2 that you will receive in 5.3 years if the…
A: STEP 1 Given a certain rate of return, present value (PV) is the current value of a future financial…
Q: EVALUATION o Given the following mutually-exclusive alternatives and a Minimum Attractive Rate of…
A: The process that analyses and evaluates an investment/project's profitability and feasibility is…
Q: Emphasis Plc. is facing a project with a known present value of abandonment £3000, but expected…
A: An abandonment project refers to a situation where a company decides to stop work on a project that…
Q: hat should be the stock price today if the discount rate is 4%?
A: The price of a stock is the PV of future dividends. We need to determine the horizon value of the…
Q: A company is due to receive €2,500,000 two-months from today and wishes to save the funds for three…
A: To calculate the forward rate, we take the average of the lower and upper bounds of the interest…
Q: The bonds of Falter Corporation were rated as Aaa and issued at par a few weeks ago. The bonds have…
A: Price of the bond is the PV of its future coupons and par value discounted using the yield to…
Q: Use the amortization table to determine how much of the 5th payment is interest. Click the icon to…
A: STEP 1 A loan's or an intangible asset's book value can be periodically reduced over a certain…
Q: (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to…
A: STEP 1 The price at which one share of a corporation would be purchased is known as the share price…
Q: 24-A project has the following net cash flows Year 0 10,500 Year 1 4,486 S Year 2 3,915 S Year 3…
A: Internal rate of return (IRR)is one of the techniques of capital budgeting that take into…
Q: The owners' equity accounts for Vulcano International are shown here: Common stock ($.50 par value)…
A: Shares outstanding is the number of shares issued by the company and available in the market. The…
Q: Sarah is thinking about taking out a loan. The interest rate is 6.00 % p.a. and is calculated…
A: Data given: Interest rate=6% p.a. compounded quarterly Term of payment= Monthly Required: Effective…
Q: Kai has $25,000 in his margin account. His broker pays 1% (continuously compounded) interest on cash…
A: In a margin account, the broker lends the investor money while using the account as collateral to…
Q: This question is about futures risk premia. Consider a two period economy.You can buy stocks in…
A: The expected return on this trading strategy would be equal to the risk-free rate, as the investment…
Q: You will receive a cash payment of $7072 in 7 years. If the relevant interest rate is 19.89%, how…
A: Time Value of Money states that a dollar earned today is more valuable than any time in the future,…
Q: ou are considering an investment that will pay you $1,200 in two year, $2,400 in three years and…
A: Price of the investment is the PV of all its future income. We need to discount each cash outflow to…
Q: Determine the taxable income for a company that had a gross income of $38 million, earnings before…
A: The taxable income of the company on which the income tax will be levied upon. The taxable income is…
Q: Suppose that you want to save $14000 over the next 6 years and you know that your savings will earn…
A: Present Value: It represents the current value of the future expected cash flows discounted over a…
Q: If TAM's stock is currently trading at AED 50 and TAM has 15 million shares outstanding, shareholder…
A: Formulas:- 1. market-to-book ratio = Market Price per shareBook Value Per share 2. market…
Q: XYZ Ferries recently gained a slot in the Cyclades islands itineraries for the next 5 years and…
A: STEP 1 Net cash flow is the gain or loss in money over a time period. A company is said to have…
Q: Explain briefly how WACC is related to the level of leverage (debt/equity ratio) of a firm. What are…
A: WACC stands for Weighted Average Cost of Capital, which is a financial metric used to represent a…
Q: Suppose that the interest rate is 4%. What is the value of the discount factor, v? υ Enter a value…
A: An interest rate is given. We have to find the value of the discount factor and the discount rate.…
Q: What is the expected return of a portfolio of two risky assets if the expected return E(Ri),…
A: The expected return of Asset A is 25% and Asset B is 15%. The weight of Asset A is 0.75 and Asset B…
Q: Suppose an investor shorts a straddle (a call option + a put option with the same strike price) with…
A: We can use the Black-Scholes formula to calculate the theoretical values of the call and put options…
Q: Assuming an inflationary economy, the future value interest factor is O always greater than 1.0. O…
A: Time Value of Money states that a dollar earned today is more valuable than any time in the future,…
Q: Question 5. You can invest in two risky assets, r₁ and r2 and one risk-free asset, r. The two risky…
A: The optimal portfolio can be found by solving the mean-variance optimization problem: Maximize:…
Q: . What does "ADR" stand for? (just the full name-no explanation needed)
A: There are many investors in the US who wants to invest in the companies that are outside US…
Q: A $200,000 loan amortized over 15 years at an interest rate of 10% per year requires payments of…
A: Given, Loan Amount = $200,000 Time Period = 15 Years Rate = 10%
Q: Use cells A6 to C17 from the given information to complete this questions. You must use the built-in…
A: As per instruction, the formula for empty cells will be provided. Please note that there are only 3…
Q: You plan to deposit $700 in a bank account now and $200 at the end of one year. If the account earns…
A: Future Value: It represents the future value of the present sum of the amount compounded over the…
Q: If you deposit$5,000in a 5 -year certificate of deposit earning2.0%per year, how much will it be…
A: This question provides information regarding the evaluation of an investment of $5,000 into a five…
Q: MagnusBane International Plc, a listed company operating in the entertainment sector, has a current…
A: (a) i. Calculation of Straight Debt Value: The straight debt value can be calculated by discounting…
Q: You are offered the chance to participate in a project that produces the following cash flows: C0…
A: Net present value of the project is calculated as Net present value = C0 + C11+k1+C21+k2
1. Answer the given question. Do not round off answers while solving, instead just the final answer will be rounded off to two decimal places.
Step by step
Solved in 2 steps with 2 images
- To test your formulas, assume the machine purchased had an estimated useful life of three years (20,000, 30,000, and 50,000 hours, respectively). Enter the new information in the Data Section of the worksheet. Does your depreciation total 320,000 under all three methods? There are three common errors made by students completing this worksheet. Lets clear up two of them. One, an asset that has a three-year life should have no depreciation claimed in Year 4. This can be corrected using an =IF statement in Year 4. For example, the correct formula in cell C32 is =IF(B32D9,0,(D7D8)/D9) or =IF(B32D9, 0, SLN(D7, D8, D9)). You may wish to edit what you have already entered rather than retype it. Two, as mentioned in requirement 2, the double-declining-balance calculation needs to be modified in the last year of the assets life. Assuming you have already modified the formula for Year 4 (per instructions in step 2), alter the formula for Year 3 also. If you corrected any formulas, test their correctness by trying different estimated useful lives (between 3 and 8) in cell E9. Then reset the Data Section to the original values, save the revised file as DEPREC2, and reprint the worksheet to show the correct formulas. The third common error doesnt need to be corrected in this problem. The general form of the double-declining-balance formula needs to be modified to check the net book value of the asset each year to make sure it does not go below salvage value. =DDB does this automatically, but if you are writing your own formulas, this gets very complicated and is beyond the scope of the problem.Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.Differential analysis for machine replacement Boyer Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is 60,000, the accumulated depreciation is 24,000, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of 180,000. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: a. Prepare a differential analysis dated May 4 to determine whether to continue with ( Alternative 1) or replace (Alternative 2) the old machine. Prepare the analysis over the useful life of the new machine. b. Based only on the data presented, should the proposal be accepted? c. What are some of the other factors that should be considered before a final decision is made?
- A truck was recently purchased for 75,000 with a salvage value of 5,000 and an estimated useful life of eight years or 150,000 miles (24,000 miles per year for the first five years and 10,000 miles per year after that). Enter the new information in the Data Section of the worksheet. Again, make sure the totals for all three methods are in agreement. Print the worksheet. Save this new data as DEPREC5.Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for eight years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After three years of recording depreciation, Montezuma determines that the delivery truck will only be useful for another three years and that the salvage value will increase to $4,000. Determine the depreciation expense for the final three years of the assets life, and create the journal entry for year four.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?
- Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and is expected to be driven for ten years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After five years of recording depreciation, Montezuma determines that the delivery truck will be useful for another five years (ten years in total, as originally expected) and that the salvage value will increase to $10,000. Determine the depreciation expense for the final five years of the assets life, and create the journal entry for years 6–10 (the entry will be the same for each of the five years).Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.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?
- Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.