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shtirl [24]
3 years ago
9

Quip Corporation wants to purchase a new machine for $300,000. Management predicts that the machine will produce sales of $200,0

00 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Quip's combined income tax rate, t, is 40%.
Management requires a minimum after-tax rate of return of 10% on all investments. What is the estimated net present value (NPV) of the proposed investment (rounded to the nearest hundred)? (The PV annuity factor for 10%, 5 years, is 3.791 and for 4 years it is 3.17. The present value $1 factor for 10%, 5 years, is 0.621.) Assume that after-tax cash inflows occur at year-end.
A) $48,800.
B) $99,000.
C) $112,000.
D) $79,800
Business
1 answer:
butalik [34]3 years ago
7 0

Answer:

net present value NPV = $79800

so correct option is D) $79,800

Explanation:

solution

we knw that Net Present value = PV of cash inflow - PV of cash outflow    ............1

so here PV of cash outflow = $300000  

and Net sales = $200000

expenses = $80000

Depreciation =  \frac{300000-50000}{5}

Depreciation =  $50000

so Net income before taxes  = Net sales - Depreciation - expenses

Net income before taxes =  $200000  - $80000 - $50000

Net income before taxes =  $70000

and Tax expenses @ 40% = $28000

so

Net income = Net income before taxes - Tax expenses

Net income = $70000  - $28000

Net income = $42000

and

Depreciation = $50000

Net cash inflow =  Net income + Depreciation

Net cash inflow =  $42000  + $50000

Net cash inflow = $92000

and

PVIFA @ 10% 5 years = $3.7908

so

PV of cash inflow = $348755

PV of salvage value = $50000 ×0.6209

PV of salvage value = $31045

and

so here  Total PV of total cash inflow = $379800

and

net present value  NPV =  Total PV of total cash inflow - PV of cash outflow

net present value NPV = $379800 - $300000

net present value NPV = $79800

so correct option is D) $79,800

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X Company purchased a patent on January 3, year 7 from Y Company for $145,000. An attorney drew up the contract between X &
Setler79 [48]

Answer:

The carrying value of the patent on X company on December 31 is $122,000

Explanation:

Computing the carrying value of the patent is as:

The total cost of the patent which will be recognized is as:

Total cost of patent = Purchased cost + Attorney value

where

Purchase cost is $145,000

Attorney cost will be divided into 2, so

Attorney cost = $15,000 / 2

= $7,500

So,

Total cost of patent = $145,000 + $7,500

Total cost of patent = $152,500

Now, amortize the patent over the useful life of patent as:

Amortize value = Patent cost / Useful life

Amortize value = $152,500 / 10

Amortize value = $15,250

But X held the patent for 2 years, so its accumulated amortization is:

Accumulated amortization = Amortize value × 2

= $15,250 × 2

Accumulated amortization  = $30,500

Now, the carrying value will be:

Carrying value = Total cost of patent - Accumulated depreciation

Carrying value = $152,500 -$30,500

Carrying value = $122,000

5 0
3 years ago
Which of these goals is specific?
stellarik [79]
The first one is specific because it tells what kind of traveling they want to check that their friends have done
6 0
3 years ago
Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receiv
Arisa [49]

Answer:

7.8%

Explanation:

The formula and the computation of the return on assets is shown below:

Return on assets = (Net income) ÷ (average of total assets)

where,

Net income is $32,500

And, the average of total assets equal to

= (Beginning assets + ending assets) ÷ 2

= ($405,000 +$425,000) ÷ 2

= $415,000

So, the return on assets is

= $32,500 ÷ $415,000

= 7.8%

6 0
2 years ago
Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows:
katovenus [111]

Answer:

* The company’s degree of operating leverage: 1.38;

* The impact on net operating income of a 22% increase in sales: it will increase by 30.4%;

* New contribution format income statement:

                                               Engberg Company

                             Contribution format income statement

                                      Amount                        Percentage of sales

Sales                              $176,900                              100%

Variable expenses            70,760                               40%

Contribution margin         106,140                               60%

Fixed expenses                 24,000

Net operating income        82,140      

Explanation:

* The company’s degree of operating leverage = Contribution / profit = 87,000/63,000 = 1.38

* The impact on net operating income of a 22% increase in sales is calculated as: Degree of operating leverage x % changes in sales revenue = 1.38 x 22% = 30.4%.

* new contribution format income statement is shown in the answer part.

4 0
3 years ago
Financial Statements of ABC Corp. indicates that ending inventory levels in 2005 and 2006 were $200,000 and $350,000 respectivel
ad-work [718]

Answer:

Cost of goods purchased= $2,350,000

Explanation:

Giving the following information:

Beginning inventory 2006= ending inventory 2005= $200,000

Ending inventory 2006= $350,000

COGS 2006= $2,200,000

<u>To calculate the purchases for 2006, we need to use the following formula:</u>

COGS= beginning finished inventory + cost of goods purchased - ending finished inventory

2,200,000 = 200,000 + cost of goods purchased - 350,000

2,200,000 - 200,000 + 350,000 = cost of goods purchased

cost of goods purchased= $2,350,000

3 0
2 years ago
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