Answer:
Testerman Construction Co.
Internal rate of return method in analyzing capital expenditure:
Present value of expenditure = $149,630
Present of cash inflows annuity = $149,630 (using 20% discount rate and present value annuity factor of 3.3251 x $45,000)
NPV = $0 (PV of cash outflow - PV of cash inflow)
Therefore, the IRR = 20%
Explanation:
a) Data and Calculations:
Investment cost = $149,630
Annual net cash flows = $45,000
Investment period = 6 years
Annuity of future cash flows = 3.3251
b) Testerman’s IRR (Internal Rate of Return) is a capital budgeting and analysis tool which determines the discount rate that makes the present value of future inflows equal to the present value of outflows from a project. This IRR helps the managers to determine the projects that add value and are worth undertaking. IRR is based on assumptions. Similar projects with the same IRR will differ in returns due to the differences in timing and the size of the cash, the amount of debts and equity used to generate the returns, and the assumption of a constant reinvestment may which IRR makes.
Answer:
$163,104
Explanation:
loan principal = monthly payment x PV annuity factor
monthly payment = $950
PV annuity factor, 0.4583%, 240 periods = 145.3726
loan principal = $950 x 145.3726 = $138,104
the price of the house = down payment + loan = $25,000 + $138,104 = $163,104
Answer:
$10,425
Explanation:
The computation of total annual costs of renting is shown below:-
Total annual costs of renting = Annual cost of rent + Annual insurance cost + Interest lost
= ($860 × 12) + $84 + ($700 × 3%)
= $10,320 + $84 + $21
= $10,425
Therefore computing the total annual costs of renting we simply applied the above formula.
Answer:
c) private not-for-profits
Explanation:
The FASB is an independent non-profit organization whose responsibility involves establishing and implementing accounting and reporting standards in the US. The Generally Accepted Accounting Principles (GAAP) guides FASB or Financial Accounting and Standards Board in fulfilling its mandate.
The FASB has the authority to interpret the GAAP for all organizations, including private and public companies, as well as profit and non-profit institutions. FASB set accounting rules and regulations to ensure standards and uniformity in the accounting industry.
