7. Allowance, a paycheck, gifts, and gains from an investment are examples of
1 answer:
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Answer:
It should replace the old machine. In the current accounting period.
Explanation:
We need to perform a relevant cost analysis:
Keep the machine:
F0 = $0
F1 = $1500 maintenance
F2 = $3,000 maintenance
F3 = $6,000 maintenance
F4 = $12,000 maintenance
F5 =$24,000 maintenance + 250 resale value
replace the machine:
F0 = -12,000 purchase + 4,000 sale of old machine = -800
F1 = $900 maintenance
F2 = $900 maintenance
F3 = $900 maintenance
F4 = $900 maintenance
F5 =$900 maintenance + 1,500 resale value
As revenues are the same for each machine, we ignore them. We will only focus on the cost each machine generate:
We solve for the present worth of each machine with a discount rate of 12%
As the present worth of the new machine is lower, the best decision for the company is to purchase the new machine and sale the old machine.
Delaying this will incur in higher maintenance cost (1,500 - 900)
and a lower recovery value (4,000 - 2,000)
As there is no cost saving for delaying the purchase, it should be made immediately.
Answer:
The correct answer is D.
Explanation:
Equity = $231,000
No. of outstanding shares = 5,000
Price of share =
Price of share = $46.2
Repurchased shares worth $18,000
No. of shares repurchased =
No. of shares repurchased = 390
When the shares would have been repurchased then the value of equity would decrease by the same amount.
Revised equity = $231,000 - $18,000
Revised equity = $213,000
No. of shares outstanding = 5,000 - 390
No. of shares outstanding = 4,610
Thus, the price of each share would be:
Share price =
Share price = $42.60