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SVEN [57.7K]
3 years ago
7

A company is planning to move to a larger office and is trying to decide if the new office should be owned or leased. Cash flows

for owning versus leasing are estimated as follows. Assume that the cash flows from operations will remain level over a 10 year holding period. If purchased, the company will invest $385,000 in equity and finance the remainder with an interest-only loan that has a balloon payment due in year 10. The after-tax cash flow from sale of the property at the end of year 10 is expected to be $750,000. What is the incremental rate of return on equity to the company, if the property is owned instead of leased

Business
1 answer:
skad [1K]3 years ago
5 0

Answer:  13.26%

Explanation:

Year 0 Investment = $385,000

Incremental Cash flow every year = Cashflow if owned - Cashflow if leased

= 164,000 - 133,000

= $31,500

Incremental cashflow in Year 10 = Incremental Cashflow + Cashflow from sale of property

= 31,500 + 750,000

= $781,500

Using Excel and the IRR function, the rate is = 13.26%

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New skills in self-honesty will help your study habits.
4 0
3 years ago
On November 7, Mura Company borrows $370,000 cash by signing a 90-day, 8%, $370,000 note payable. 1. Compute the accrued interes
Hatshy [7]

Answer:

At 31 December, the Interest for 54 days accrues as follows :

Interest expense $17,740 (debit)

Note Payable $17,740 (credit)

On payment February 5, the Interest expense will be capitalized in the Note Payable as follows :

Note Payable $407,473 (debit)

Cash $407,473 (credit)

Explanation:

AT, November 7, When Mura Company borrows the money :

Cash $370,000 (debit)

Note Payable $370,000  (credit)

At 31 December, the Interest for 54 days accrues as follows :

Interest expense $17,740 (debit)

Note Payable $17,740 (credit)

Interest expense calculation = $370,000 × 8% × 54/90

                                                = $17,740

At February 5, the interest for 60 days accrues as follows :

Interest expense $19,733 (debit)

Note Payable $19,733 (credit)

Interest expense calculation = $370,000 × 8% × 60/90

                                                = $19,733

On payment February 5, the Interest expense will be capitalized in the Note Payable as follows :

Note Payable $407,473 (debit)

Cash $407,473 (credit)

Note Payable Calculation = $370,000 + $19,733 + $17,740

                                              $407,473

3 0
3 years ago
Question 2 of 10
gavmur [86]

Answer:

C.

Explanation:

The term used to define standards of behavior that governs individual's and companies conduct is ethics.

The term ethics is derived from the Greek word ethos, meaning, way of living. Ethics comes under the rubric of philosophy and is related to the subject of human conduct, especially concerning the actions of humans towards the society.

Ethics are those moral principles in which the conduct of companies and human behaviors are anchored.

Therefore, the correct answer is option C.

3 0
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Marlow Company purchased a point of sale system on January 1 for $5,800. This system has a useful life of 5 years and a salvage
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Answer: $1392

Explanation:

The depreciation rate under straight line is =1/5=0.2

The depreciation rate under double declining is = 0.2 × 2 = 0.4

Depreciation expense for the first year = 0.4 × $5800 = $2320.

At the beginning of year two, net book value = $5800 - $2320 = $3480

Depreciation expense for year two = 0.4 × $3480 = $1392

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3 years ago
The point at which birth and death rates balance is called
yawa3891 [41]

Answer:

B balancing growth

Explanation:

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