Problem 6 Four, Inc. provided the following balances at the end of the current year: Wasting asset, at cost P20,000,000 Accumulated depletion 2,500,000 Share capital 50,000,000 Capital liquidated 1,800,000 Retained earnings 1,500,000 Depletion based on 50,000 units at P20 per unit 1,000,000 Inventory of resource deposit 100,000 Required: a. Compute the maximum dividend that can be declared. b. P

Problem 6 Four, Inc. provided the following balances at the end of the current year: Wasting asset, at cost P20,000,000 Accumulated depletion 2,500,000 Share capital 50,000,000 Capital liquidated 1,800,000 Retained earnings 1,500,000 Depletion based on 50,000 units at P20 per unit 1,000,000 Inventory of resource deposit 100,000 Required: a. Compute the maximum dividend that can be declared. b. P

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.1.1MBA

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Cost of the equipment $146,000 Reduced annual labor costs $45,000 Estimated life of equipment 10 years Terminal disposal value $0 After-tax cost of capital 8% Tax rate 28% Assume depreciation is calculated on a straight-line basis for tax purposes. Assume all cash flows occur at year-end except for initial investment amounts. 1. Calculate (a) net present value, (b) payback period, (c) discounted paybackperiod, and (d) internal rate of return. 2. Compare and contrast the capital budgeting methods in requirement 1.
Cost of the equipment $146,000 Reduced annual labor costs $45,000 Estimated life of equipment 10 years Terminal disposal value $0 After-tax cost of capital 8% Tax rate 28% Assume depreciation is calculated on a straight-line basis for tax purposes. Assume all cash flows occur at year-end except for initial investment amounts. 1. Calculate (a) net present value, (b) payback period, (c) discounted paybackperiod, and (d) internal rate of return. 2. Compare and contrast the capital budgeting methods in requirement 1. please do not plagiarise it from other tutoring sites thanku
MACHINE A MACHINE B INITIAL COST R100 000 R110 000 EXPECTED ECONOMIC LIFE 5 YEARS 5 YEARS EXPECTED DISPOSAL/RESIDUAL VALUE R10 000 EXPECTED NET CASH INFLOWS R R END OF: YEAR 1 34 000 33 000 YEAR 2 27 000 33 000 YEAR 3 32 000 33 000 YEAR 4 30 000 33 000 YEAR 5 26 000 33 000 DEPRECIATION PER YEAR 18 000 22 000 COMPANY ESTIMATES COST CAPITAL = 14% 1) Calculate the payback period for Machine A and B (answers must be expressed in years, monthsand days).
A B Initial investment outlay ($) 200,000 275,000 Freight Charges ($) 20,000 30,000 Set Up charges ($) 5,000 7,000 Economic Life (Years) 10 10 Liquidation value at end of economic life ($) 12,000 17,000 Other fixed costs ($) 4,000 20,000 Production and sales volume (units) 9,000 12,000 Sales Price ($) 15 15 Variable Cost ($) 2.45 2.00 Rate of interest (%) 6 6 Ascertain the preferred project using:a. The profit comparison method. b. The average rate of return method. c. The static payback method d. Re-evaluate the projects using the Net Present Value. Are the results of the Project selection process the same? If different, what reasons can you offer?
25 A machine costs R20 000. Depreciation will be written off at 20% per annum. Which one of the following amounts shows its carrying amount after 4 years if the reducing balance method is used? A. R9 030 B. R8 192 C. R8 256 D. R8 524
Service Output MethodGiven:FC = 800,000.00 pesosSV = 200,000.00 pesosn = 5 yearsOutput in year 1 = 300 unitsTotal output in 5 yrs = 1000 unitsa. Depreciation per unit = ?b. Book Value at year 1= ?
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $160,000 of equipment, having a four-year useful life: Net Cash Flow $69,000 53,000 40,000 27,000 Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 8 9 10 Net Income $41,000 25,000 12,000 (1,000) Present Value of $1 at Compound Interest 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 15% 12% 20% 0.893 0.870 0.833 0.797 0.756 0.694 0.712 0.658 0.579 0.636 0.572 0.482 0.567 0.497 0.402 0.507 0.432 0.335 0.452 0.376 0.279 0.404 0.327 0.233 0.361 0.284 0.194 0.322 0.247 0.162 a. Assuming that the desired rate of return is 12%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Present value of net cash flow Amount to be invested Net present value required,…
H7. Query Company is considering an investment in machinery with the following information. Initial investment $ 200,000 Materials, labor, and overhead (except depreciation) $ 45,000 Useful life 9 years Depreciation—Machinery 20,000 Salvage value $ 20,000 Selling, general, and administrative expenses 5,000 Expected sales per year 10,000 units Selling price per unit $ 10 (a) Compute the investment’s annual income and annual net cash flow. (b) Compute the investment’s payback period. Please show all step by step calculation
MACHINE A MACHINE B INITIAL COST R100 000 R110 000 EXPECTED ECONOMIC LIFE 5 YEARS 5 YEARS EXPECTED DISPOSAL/RESIDUAL VALUE R10 000 EXPECTED NET CASH INFLOWS R R END OF: YEAR 1 34 000 33 000 YEAR 2 27 000 33 000 YEAR 3 32 000 33 000 YEAR 4 30 000 33 000 YEAR 5 26 000 33 000 DEPRECIATION PER YEAR 18 000 22 000 COMPANY ESTIMATES COST CAPITAL = 14% 3)Calculate the net present value of each machine
An asset has the estimated salvage values for various lives, shown in the table below. For each possible life from 1 to 6 by 1, determine the capital recovery cost for MARR of 8%/year. EOY 0 1 2 3 4 5 6 NCF -$150,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 Estimated SV $150,000 $130,000 $110,000 $100,000 $90,000 $85,000 $82,000 Capital recovery cost with 1-year life $ Capital recovery cost with 2 years life $ Capital recovery cost with 3 years life $ Capital recovery cost with 4 years life $ Capital recovery cost with 5 years life $ Capital recovery cost with 6 years life $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±50.
The plant and machinery at cost account of a business for the year ended 30 June 20X4 was as follows: PLANT AND MACHINERY – COST $ $ 20X3 20X3 1 Jul Balance 240,000 30 Sep Transfer disposal account 60,000 20X4 20X4 1 Jan Cash – purchase of plant 160,000 30 Jun Balance 340,000 400,000 400,000 The company's policy is to charge depreciation at 20% per year on the reducing balance basis, with proportionate depreciation in the years of purchase and disposal. What should be the depreciation charge for the year ended 30 June 20X4? A $68,000 B $64,000 C $61,000 D $55,000
Net Present Value Method The following data are accumulated by Lingle Company in evaluating the purchase of $139,100 of equipment, having a 4-year useful life: Net Income Net Cash Flow $55,000 42,000 32,000 21,000 Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 В 9 10 $32,000 20,000 10,000 (1,000) Present Value of $1 at Compound Interest A 6% 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.665 0.513 0.627 0.467 0.592 0.424 0.558 0.386 0.943 0.890 0.840 0.792 0.747 0.705 12% 0.893 0.797 0.756 0.712 0.658 0.636 0.572 0.567 0.497 0.507 0.432 0.452 0.376 0.404 0.327 0.361 0.284 0.322 15% 0.870 0.247 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162