The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 43,000 m² and the installed liner cost was $8 per m². In order to recover the investment, the owner charges to unload at the rates of $13 per pickup, $25 per dump truck, and $70 per compactor truck load. The fill area is adequate for 7 years. If the annual traffic is estimated to be 2500 pickup loads, 650 dump-truck loads, and 1200 compactor-truck loads, what rate of return will the landfill owner make on the investment? The rate of return that will be made by the landfill owner, (in %) Round to the nearest two (2) decimal places Hint: compute for internal rate of return Add your answer

The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 43,000 m² and the installed liner cost was $8 per m². In order to recover the investment, the owner charges to unload at the rates of $13 per pickup, $25 per dump truck, and $70 per compactor truck load. The fill area is adequate for 7 years. If the annual traffic is estimated to be 2500 pickup loads, 650 dump-truck loads, and 1200 compactor-truck loads, what rate of return will the landfill owner make on the investment? The rate of return that will be made by the landfill owner, (in %) Round to the nearest two (2) decimal places Hint: compute for internal rate of return Add your answer

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 6PA: Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one...

See similar textbooks

Similar questions

Tree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $5,000,000 for the land. Tree Lovers will sell the lumber as it is harvested and it expects to deplete it over ten years (150 acres in year one, 300 acres in year two, 250 acres in year three, 150 acres in year four, and 100 acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.
Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.
Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for 120,000 miles. Montello uses the units-of-production depreciation method and in year one it expects to use the truck for 23,000 miles. Calculate the annual depreciation expense.
St. Johns Medical Center (SJMC) has five medical technicians who are responsible for conducting cardiac catheterization testing in SJMCs Cath Lab. Each technician is paid a salary of 36,000 and is capable of conducting 1,000 procedures per year. The cardiac catheterization equipment is one year old and was purchased for 250,000. It is expected to last five years. The equipments capacity is 25,000 procedures over its life. Depreciation is computed on a straight-line basis, with no salvage value expected. The reading of the catheterization results is conducted by an outside physician whose fee is 120 per test. The technicians report with the outside physicians note of results is sent to the referring physician. In addition to the salaries and equipment, SJMC spends 50,000 for supplies and other costs needed to operate the equipment (assuming 5,000 procedures are conducted). When SJMC purchased the equipment, it fully expected to perform 5,000 procedures per year. In fact, during its first year of operation, 5,000 procedures were run. However, a larger hospital has established a clinic in the city and will siphon off some of SJMCs business. During the coming years, SJMC expects to run only 4,200 cath procedures yearly. SJMC has been charging 850 for the procedureenough to cover the direct costs of the procedure plus an assignment of general overhead (e.g., depreciation on the hospital building, lighting and heating, and janitorial services). At the beginning of the second year, an HMO from a neighboring community approached SJMC and offered to send its clients to SJMC for cardiac catheterization provided that the charge per procedure would be 550. The HMO estimates that it can provide about 500 patients per year. The HMO has indicated that the arrangement is temporaryfor one year only. The HMO expects to have its own testing capabilities within one year. Required: 1. Classify the resources associated with the cardiac catheterization activity into one of the following: (1) committed resources, or (2) flexible resources. 2. Calculate the activity rate for the cardiac catheterization activity. Break the activity rate into fixed and variable components. Now, classify each activity resource as relevant or irrelevant with respect to the following alternatives: (1) accept the HMO offer, or (2) reject the HMO offer. Explain your reasoning. 3. Assume that SJMC will accept the HMO offer if it reduces the hospitals operating costs. Should the HMO offer be accepted? 4. Jerold Bosserman, SJMCs hospital controller, argued against accepting the HMOs offer. Instead, he argued that the hospital should be increasing the charge per procedure rather than accepting business that doesnt even cover full costs. He also was concerned about local physician reaction if word got out that the HMO was receiving procedures for 550. Discuss the merits of Jerolds position. Include in your discussion an assessment of the price increase that would be needed if the objective is to maintain total revenues from cardiac catheterizations experienced in the first year of operation. 5. Chandra Denton, SJMCs administrator, has been informed that one of the Cath Lab technicians is leaving for an opportunity at a larger hospital. She met with the other technicians, and they agreed to increase their hours to pick up the slack so that SJMC wont need to hire another technician. By working a couple hours extra every week, each remaining technician can perform 1,050 procedures per year. They agreed to do this for an increase in salary of 2,000 per year. How does this outcome affect the analysis of the HMO offer? 6. Assuming that SJMC wants to bring in the same revenues earned in the cardiac catheterization activitys first year less the reduction in resource spending attributable to using only four technicians, how much must SJMC charge for a procedure?
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?
The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 50,000 m2 and the installed liner cost was $8 per m2. In order to recover the investment, the owner charges to unload at the rates of $10 per pick-up, $25 per dumptruck, and $70 per compactor-truck load. The fill area is adequate for 4 years. If the annual traffic is estimated to be 2500 pick-up loads, 650 dumptruck loads, and 1200 compactor-truck loads, what rate of return will the landfill owner make on the investment?
During the construction of a highway bypass, earth moving equipment costing P400,000 was purchased for use in transporting fill from the borrow pit. At the end of the 4-year project, the equipment will be sold for P200,000. The schedule for moving fill calls for a total of 100,000 cubic feet during the project. In the first year, 40% of the total fill is required; in the second year, 30%; in the third year 25%; and in the final year, the remaining 5%. Determine the declining balance depreciation schedule.
During the construction of a highway bypass, earth moving equipment costing P400,000 was purchased for use in transporting fill from the borrow pit. At the end of the 4-year project, the equipment will be sold for P200,000. The schedule for moving fill calls for a total of 100,000 cubic feet during the project. In the first year, 40% of the total fill is required; in the second year, 30%; in the third year 25%; and in the final year, the remaining 5%. Determine a) the units-of-production depreciation schedule b) the declining balance depreciation schedule.
Peachtree Construction Company, a highway contractor, is considering the purchase of a new trench excavator that costs $300,000 and can dig a 3-foot-wide trench at the rate of 16 feet per hour. The contractor gets paid according to the usage of the equipment. $100 per hour. The expected average annual usage is 500 hours, and maintenance and operating costs will be $10 per hour. The contractor will depreciate the equipment by using a five-year MACRS, units-of-production method. At the end of five years, the excavator will be sold for $100,000.(a) Assuming that the contractor's marginal tax rate is 35% per year, determine the annual after-tax cash flow.(b) Is this a good investment if the contractor requires 15% return on investment?
Alfred Home Construction is considering the purchase of five dumpsters and the transport truck to store and transfer construction debris from building sites. The entire rig is estimated to have an initial cost of $142,500, a life of 8 years, a $8500 salvage value, an operating cost of $40 per day, and an annual maintenance cost of $8000. Alternatively, Alfred can obtain the same services from the city as needed at each construction site for an initial delivery cost of $125 per dumpster per site and a daily charge of $34 per day per dumpster. An estimated 19 construction sites will need debris storage throughout the average year. If the minimum attractive rate of return is 11% per year, how many days per year must the equipment be required to justify its purchase? The number of days per year the equipment must be required is determined to be
Alfred Home Construction is considering the purchase of five dumpsters and the transport truck to store and transfer construction debris from building sites. The entire rig is estimated to have an initial cost of $125,000, a life of 8 years, a $5000 salvage value, an operating cost of $40 per day, and an annual maintenance cost of $2000. Alternatively, Alfred can obtain the same services from the city as needed at each construction site for an initial delivery cost of $125 per dumpster per site and a daily charge of $20 per day per dumpster. An estimated 45 construction sites will need debris storage throughout the average year. If the minimum attractive rate of return is 12% per year, how many days per year must the equipment be required to justify its purchase?
The Tennessee Department of Highways is trying to decide whether it should “hot-patch” a short stretch of an existing highway or resurface it. If the hotpatch method is chosen, approximately 500 cubic meters of material would be required at a cost of $800/cubic meter (in place). If hot-patched, the shoulders will have to be improved at the same time at a cost of $24,000. The shoulders must be maintained at a cost of $3000 every 2 years. The annual cost of routine maintenance on the patched road is estimated to be $6000. Alternatively, the state can resurface the road at a cost of $500,000. If maintained properly, at a cost of $2000 per year beginning in the second year, the surface will last for 10 years. The shoulders would require reworking at the end of the fifth year at a cost of $15,000. Regardless of the method selected, the road will be completely rebuilt in 10 years. At an interest rate of 9%, which alternative should be chosen?