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Connect Access Card for Financial Accounting: Information and Decisions
8th Edition
ISBN: 9781259662966
Author: John J Wild
Publisher: McGraw-Hill Education
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Jenna and Matt Wilder are completing their second year operating Mountain High, a downhill ski area and resort. Mountain High reports a net loss of $(10,000) for its second year, which includes an $85,000 unusual loss from fire. This past year also involved major purchases of plant assets for renovation and expansion, yielding a year-end total asset amount of $800,000. Mountain High’s net cash outflow for its second year is $(5,000); a summarized version of its statement of cash flows follows. Net cash flow provided by operating activities . . . . . . . . . . . . . . . $ 295,000 Net cash flow used by investing activities . . . . . . . . . . . . . . . . . . (310,000) Net cash flow provided by financing activities . . . . . . . . . . . . . . . 10,000 Required Write a one-page memorandum to the Wilders evaluating Mountain High’s current performance and assessing its future. Give special emphasis to cash flow data and their interpretation.
Economic Life
The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected
to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected
life. The expected salvage values after tax adjustments for the truck are given below. The company's cost of capital is 10
percent.
Year
0
1
2
3
4
5
Annual Operating Cash Flow Salvage Value
-$22,500
6,250
6,250
6,250
6,250
6,250
$22,500
17,500
14,000
11,000
5,000
0
a. What is the optimal number of years to operate the truck? Do not round intermediate calculations. Round your answers
to the nearest whole number.
years
b. Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR
of a project?
I. Salvage possibilities would have no effect on NPV and IRR..
II. No, Salvage possibilities could only raise NPV and IRR.
III. Yes, Salvage possibilities could only lower NPV and IRR.…
The Fancy Manufacturing Company is considering a new investment. Financial projections for the
investment are tabulated here. The corporate tax rate is 21 percent. Assume all sales revenue is received in
cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year.
All net working capital is recovered at the end of the project.
Year 1
Year 2
a.
Investment
Sales revenue
Operating costs
Depreciation
Net working capital spending 305
Year 0
$ 26,400
C.
$ 13,500
2,950
6,600
205
Year 3
$15,100
3,125 4,300
6,600
6,600
235
$16,500
155
Year 4
$13,000
2,900
6,600
?
Compute the incremental net income of the investment for each year. (Do not round intermediate
calculations and round your answers to the nearest whole number, e.g., 32.)
Compute the incremental cash flows of the investment for each year. (A negative amount should be
b. indicated by a minus sign. Do not round intermediate calculations and round your answers to the
nearest whole number,…
Chapter 12 Solutions
Connect Access Card for Financial Accounting: Information and Decisions
Ch. 12 - What is the reporting purpose of the statement of...Ch. 12 - Prob. 2DQCh. 12 - Prob. 3DQCh. 12 - Describe the direct method of reporting cash flows...Ch. 12 - Prob. 5DQCh. 12 - Prob. 6DQCh. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - Prob. 9DQCh. 12 - Prob. 10DQ
Ch. 12 - Prob. 11DQCh. 12 - Prob. 12DQCh. 12 - Prob. 13DQCh. 12 - Prob. 14DQCh. 12 - Prob. 15DQCh. 12 - Prob. 1QSCh. 12 - Prob. 2QSCh. 12 - Prob. 3QSCh. 12 - Prob. 4QSCh. 12 - Prob. 5QSCh. 12 - Prob. 6QSCh. 12 - Prob. 7QSCh. 12 - Prob. 8QSCh. 12 - Computing financing cash flows P3 The following...Ch. 12 - Prob. 10QSCh. 12 - Prob. 11QSCh. 12 - Prob. 12QSCh. 12 - Prob. 13QSCh. 12 - Refer to the data in QS 12-11. How much cash is...Ch. 12 - Prob. 15QSCh. 12 - Prob. 16QSCh. 12 - Prob. 17QSCh. 12 - Prob. 18QSCh. 12 - Prob. 19QSCh. 12 - Prob. 20QSCh. 12 - The following transactions and events occurred...Ch. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Prob. 4ECh. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - Prob. 7ECh. 12 - Prob. 8ECh. 12 - Prob. 9ECh. 12 - Prob. 10ECh. 12 - Prob. 11ECh. 12 - Prob. 12ECh. 12 - Prob. 13ECh. 12 - Prob. 14ECh. 12 - Prob. 15ECh. 12 - Prob. 16ECh. 12 - Prob. 17ECh. 12 - Prob. 18ECh. 12 - Prob. 1PSACh. 12 - Prob. 2PSACh. 12 - Prob. 3PSACh. 12 - Prob. 4PSACh. 12 - Prob. 5PSACh. 12 - Prob. 6PSACh. 12 - Prob. 7PSACh. 12 - Prob. 8PSACh. 12 - Prob. 1PSBCh. 12 - Prob. 2PSBCh. 12 - Prob. 3PSBCh. 12 - Prob. 4PSBCh. 12 - Prob. 5PSBCh. 12 - Prob. 6PSBCh. 12 - Prob. 7PSBCh. 12 - Prob. 8PSBCh. 12 - Santana Rey, owner of Business Solutions, decides...Ch. 12 - Prob. 1BTNCh. 12 - Prob. 2BTNCh. 12 - Prob. 3BTNCh. 12 - Prob. 4BTNCh. 12 - Access the March 31, 2015, filing of the 10-K...Ch. 12 - Prob. 6BTNCh. 12 - Prob. 8BTNCh. 12 - Prob. 10BTN
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