Using an Excel spreadsheet, set the following values in cells: Acme’s cost of investment in PHC. Percentage acquired. First-year PHC reported income. Projected growth rate in income. PHC annual dividends. Annual excess patent amortization.

Question

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Answer 1

Question

Chapter 1, Problem 1DYS

1.

To determine

Using an Excel spreadsheet, set the following values in cells:

Acme’s cost of investment in PHC.

Percentage acquired.

First-year PHC reported income.

Projected growth rate in income.

PHC annual dividends.

Annual excess patent amortization.

1.

Expert Solution

Explanation of Solution

The required values are presented in excel sheet as follows:

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

2.

To determine

Referring to the values in (1), prepare the following schedules using columns for the years 2018 through 2022.

Acme’s equity in PHC earnings with rows showing these:

Acme’s share of PHC reported income.

Amortization expense.

Acme’s equity in PHC earnings.

Acme’s Investment in PHC balance with rows showing the following:

Beginning balance.

Equity earnings.

Dividends.

Ending balance.

2.

Expert Solution

Explanation of Solution

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

3.

To determine

Compute the average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC. Find the maximum amount which Acme can pay for PHC if it wishes to earn at least a 10 percent average return on beginning investment balance.

3.

Expert Solution

Explanation of Solution

The average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC is as follows:

Growth rate in income	10%
Dividends	30000
Cost	639794
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 639,794	$ 686,794	$ 741,194	$ 803,734	$ 875,228
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 686,794	$ 741,194	$ 803,734	$ 875,228	$ 956,571

ROI	9.22%	9.67%	10.06%	10.39%	10.67%
Average	10.00%

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Answer 2

Question

Chapter 1, Problem 1DYS

1.

To determine

Using an Excel spreadsheet, set the following values in cells:

Acme’s cost of investment in PHC.

Percentage acquired.

First-year PHC reported income.

Projected growth rate in income.

PHC annual dividends.

Annual excess patent amortization.

1.

Expert Solution

Explanation of Solution

The required values are presented in excel sheet as follows:

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

2.

To determine

Referring to the values in (1), prepare the following schedules using columns for the years 2018 through 2022.

Acme’s equity in PHC earnings with rows showing these:

Acme’s share of PHC reported income.

Amortization expense.

Acme’s equity in PHC earnings.

Acme’s Investment in PHC balance with rows showing the following:

Beginning balance.

Equity earnings.

Dividends.

Ending balance.

2.

Expert Solution

Explanation of Solution

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

3.

To determine

Compute the average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC. Find the maximum amount which Acme can pay for PHC if it wishes to earn at least a 10 percent average return on beginning investment balance.

3.

Expert Solution

Explanation of Solution

The average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC is as follows:

Growth rate in income	10%
Dividends	30000
Cost	639794
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 639,794	$ 686,794	$ 741,194	$ 803,734	$ 875,228
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 686,794	$ 741,194	$ 803,734	$ 875,228	$ 956,571

ROI	9.22%	9.67%	10.06%	10.39%	10.67%
Average	10.00%

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Answer 3

Question

Chapter 1, Problem 1DYS

1.

To determine

Using an Excel spreadsheet, set the following values in cells:

Acme’s cost of investment in PHC.

Percentage acquired.

First-year PHC reported income.

Projected growth rate in income.

PHC annual dividends.

Annual excess patent amortization.

1.

Expert Solution

Explanation of Solution

The required values are presented in excel sheet as follows:

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

2.

To determine

Referring to the values in (1), prepare the following schedules using columns for the years 2018 through 2022.

Acme’s equity in PHC earnings with rows showing these:

Acme’s share of PHC reported income.

Amortization expense.

Acme’s equity in PHC earnings.

Acme’s Investment in PHC balance with rows showing the following:

Beginning balance.

Equity earnings.

Dividends.

Ending balance.

2.

Expert Solution

Explanation of Solution

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

3.

To determine

Compute the average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC. Find the maximum amount which Acme can pay for PHC if it wishes to earn at least a 10 percent average return on beginning investment balance.

3.

Expert Solution

Explanation of Solution

The average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC is as follows:

Growth rate in income	10%
Dividends	30000
Cost	639794
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 639,794	$ 686,794	$ 741,194	$ 803,734	$ 875,228
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 686,794	$ 741,194	$ 803,734	$ 875,228	$ 956,571

ROI	9.22%	9.67%	10.06%	10.39%	10.67%
Average	10.00%

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Answer 4

Question

Chapter 1, Problem 1DYS

1.

To determine

Using an Excel spreadsheet, set the following values in cells:

Acme’s cost of investment in PHC.

Percentage acquired.

First-year PHC reported income.

Projected growth rate in income.

PHC annual dividends.

Annual excess patent amortization.

1.

Expert Solution

Explanation of Solution

The required values are presented in excel sheet as follows:

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

2.

To determine

Referring to the values in (1), prepare the following schedules using columns for the years 2018 through 2022.

Acme’s equity in PHC earnings with rows showing these:

Acme’s share of PHC reported income.

Amortization expense.

Acme’s equity in PHC earnings.

Acme’s Investment in PHC balance with rows showing the following:

Beginning balance.

Equity earnings.

Dividends.

Ending balance.

2.

Expert Solution

Explanation of Solution

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

3.

To determine

Compute the average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC. Find the maximum amount which Acme can pay for PHC if it wishes to earn at least a 10 percent average return on beginning investment balance.

3.

Expert Solution

Explanation of Solution

The average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC is as follows:

Growth rate in income	10%
Dividends	30000
Cost	639794
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 639,794	$ 686,794	$ 741,194	$ 803,734	$ 875,228
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 686,794	$ 741,194	$ 803,734	$ 875,228	$ 956,571

ROI	9.22%	9.67%	10.06%	10.39%	10.67%
Average	10.00%

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Answer 5

Chapter 1, Problem 1DYS

1.

To determine

Using an Excel spreadsheet, set the following values in cells:

Acme’s cost of investment in PHC.

Percentage acquired.

First-year PHC reported income.

Projected growth rate in income.

PHC annual dividends.

Annual excess patent amortization.

1.

Expert Solution

Explanation of Solution

The required values are presented in excel sheet as follows:

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

2.

To determine

Referring to the values in (1), prepare the following schedules using columns for the years 2018 through 2022.

Acme’s equity in PHC earnings with rows showing these:

Acme’s share of PHC reported income.

Amortization expense.

Acme’s equity in PHC earnings.

Acme’s Investment in PHC balance with rows showing the following:

Beginning balance.

Equity earnings.

Dividends.

Ending balance.

2.

Expert Solution

Explanation of Solution

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

3.

To determine

Compute the average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC. Find the maximum amount which Acme can pay for PHC if it wishes to earn at least a 10 percent average return on beginning investment balance.

3.

Expert Solution

Explanation of Solution

The average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC is as follows:

Growth rate in income	10%
Dividends	30000
Cost	639794
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 639,794	$ 686,794	$ 741,194	$ 803,734	$ 875,228
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 686,794	$ 741,194	$ 803,734	$ 875,228	$ 956,571

ROI	9.22%	9.67%	10.06%	10.39%	10.67%
Average	10.00%

Answer 6

Chapter 1, Problem 1DYS

1.

To determine

Using an Excel spreadsheet, set the following values in cells:

Acme’s cost of investment in PHC.

Percentage acquired.

First-year PHC reported income.

Projected growth rate in income.

PHC annual dividends.

Annual excess patent amortization.

1.

Expert Solution

Explanation of Solution

The required values are presented in excel sheet as follows:

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

Answer 7

Chapter 1, Problem 1DYS

1.

To determine

Using an Excel spreadsheet, set the following values in cells:

Acme’s cost of investment in PHC.

Percentage acquired.

First-year PHC reported income.

Projected growth rate in income.

PHC annual dividends.

Annual excess patent amortization.

Answer 8

1.

Expert Solution

Explanation of Solution

The required values are presented in excel sheet as follows:

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

2.

To determine

Referring to the values in (1), prepare the following schedules using columns for the years 2018 through 2022.

Acme’s equity in PHC earnings with rows showing these:

Acme’s share of PHC reported income.

Amortization expense.

Acme’s equity in PHC earnings.

Acme’s Investment in PHC balance with rows showing the following:

Beginning balance.

Equity earnings.

Dividends.

Ending balance.

2.

Expert Solution

Explanation of Solution

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

Answer 13

2.

To determine

Referring to the values in (1), prepare the following schedules using columns for the years 2018 through 2022.

Acme’s equity in PHC earnings with rows showing these:

Acme’s share of PHC reported income.

Amortization expense.

Acme’s equity in PHC earnings.

Acme’s Investment in PHC balance with rows showing the following:

Beginning balance.

Equity earnings.

Dividends.

Ending balance.

Answer 14

2.

Expert Solution

Explanation of Solution

Growth rate in income	10%
Dividends	30000
Cost	700000
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 700,000	$ 747,000	$ 801,400	$ 863,940	$ 935,434
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 747,000	$ 801,400	$ 863,940	$ 935,434	$ 1,016,777

ROI	8.43%	8.89%	9.30%	9.66%	9.98%
Average	9.25%

Answer 15

2.

Expert Solution

Answer 16

2.

Expert Solution

Answer 17

Expert Solution

Answer 18

3.

To determine

Compute the average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC. Find the maximum amount which Acme can pay for PHC if it wishes to earn at least a 10 percent average return on beginning investment balance.

3.

Expert Solution

Explanation of Solution

The average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC is as follows:

Growth rate in income	10%
Dividends	30000
Cost	639794
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 639,794	$ 686,794	$ 741,194	$ 803,734	$ 875,228
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 686,794	$ 741,194	$ 803,734	$ 875,228	$ 956,571

ROI	9.22%	9.67%	10.06%	10.39%	10.67%
Average	10.00%

Answer 19

3.

To determine

Compute the average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC. Find the maximum amount which Acme can pay for PHC if it wishes to earn at least a 10 percent average return on beginning investment balance.

Answer 20

3.

Expert Solution

Explanation of Solution

The average of the projected returns on beginning investment balances for the first five years of Acme’s investment in PHC is as follows:

Growth rate in income	10%
Dividends	30000
Cost	639794
Annual amortization	$ 15,000
1st year PHC income	$ 185,000
Percentage owned	40%

	2018	2019	2020	2021	2022
PHC reported income	$ 74,000	$ 81,400	$ 89,540	$ 98,494	$ 108,343
Amortization	$ 15,000	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343

Beginning balance	$ 639,794	$ 686,794	$ 741,194	$ 803,734	$ 875,228
Equity earnings	$ 59,000	$ 66,400	$ 74,540	$ 83,494	$ 93,343
Dividends	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)	$ (12,000)
Ending balance	$ 686,794	$ 741,194	$ 803,734	$ 875,228	$ 956,571

ROI	9.22%	9.67%	10.06%	10.39%	10.67%
Average	10.00%