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Nady [450]
3 years ago
15

Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The syst

em costs $230,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $8,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $20,000 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. Aerotron Electronics must borrow 1/2 of the purchase price, but they cannot start repaying the loan for 2 years. The bank has agreed to 3 equal annual payments, with the 1st payment due at the end of year 2. The loan interest rate is 8% compounded annually. Aerotron Electronics’ MARR is 10% compounded annually.
What is the annual worth of this investment?
Business
1 answer:
tino4ka555 [31]3 years ago
6 0

Answer:

Explanation:

Annual worth: this will be the annuity payment equivalent to all the cashflow of the investment. Thus the PMT of the net present value

Cash Investment at F0: <em>230,000/2 = 115,000</em>

present value of 7,500 salvage value:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  7,500.00

time   7 years

MARR: 10% = 0.1

\frac{7500}{(1 + 0.1)^{7} } = PV  

PV  <em> 3,848.69 </em>

<u>Then, we need to calculate the present value of the loan discounted at 10%</u>

half the investment is finance: 230,000 / 2 = <em>115,000</em>

Then, this capitalize 2 year at 8% before the first payment:

Principal \: (1+ r)^{time} = Amount

Principal 115,000.00

time 2 year

MARR: 10% = 0.08000

115000 \: (1+ 0.08)^{2} = Amount

Amount 134,136.00

Now we need to discount this loan at 10% which is our rate of return:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  134,136.00

time   2.00

MARR: 10% = 0.1

\frac{134136}{(1 + 0.1)^{2} } = PV  

PV   <em>110,856.20 </em>

Finally: we add this values to get the resent worth:

<em>115,000 +  110,856.20 - 3,848.69 = </em><em>222,007.51</em>

<em />

Last step, we calculate the PMT of the present worth:

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\

PV 222,007.51

time 7 years

MARR: 10% = 0.1

222007.51 \div \frac{1-(1+0.1)^{-7} }{0.1} = C\\

C  $ 45,601.564

<em />

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Answer:

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Explanation:

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3 years ago
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2 years ago
The following transactions apply to Ozark Sales for 2018: The business was started when the company received $49,500 from the is
Oksana_A [137]

Answer: a. Dr Interest expense  $341.67

                   Cr    Accrued Interest Liability   $341.67.

b. Total Amount of Current Liabilities = $72741.67

Explanation:

Accrued Interest on notes Payable

The Note was issued on 1 September 2018, note Payable is $20500 interest interest will be incurred from the Month of September to February because the Note will be settled on 1 March 2019, How ever The year ended on the 31st of December (current financial period) which means Ozark Sales Company incurred interest for 4 months in the current year (1 September to 31 December 2018).

Interest Calculation

Note Payable Amount = $20500

Interest rate (R) = 5% per annum

Period (Number of months) = 4 months (September to December 2018)

Accrued Interest expense = $20500 x 5/100 x 4/12

Accrued Interest expense = $341.6666667 = $341.67

Journal Entry

Dr Interest expense  $341.67

Cr         Accrued Interest Liability   $341.67.

Current Liabilities

Ozark Sales current liabilities include Purchased equipment inventory, Accrued Interest expense incurred on the Notes Payable and the Notes Payable amount. Ozark Sales Made a Payment of $125100, this payment was made to settle some of the total current liabilities.

The total Current Liabilities (The Balance) on 31 December 2018 will include all transactions mentioned about and the payment of $125100 will be subtracted. The Balance will the amount that will be reflected in the Balance sheet for Current Assets

Purchased Equipment inventory = $177 000

Notes Payable = $20500

Accrued Interest Liability = $ 341.67

Accounts Payable Payment  = $125100

Total Amount of Current Liabilities = $177 000 + $20500 + $341.67 - $125100

Total Amount of Current Liabilities = $72741.67

7 0
3 years ago
"Shenandoah Skies" is the name of an oil painting by artist Kara Lee. In each of the following cases, determine the amount and c
masya89 [10]

Answer:

A. $6000 ordinary income on sale of a creative asset by the creator of the asset.

B. $4000 ordinary income on the sale of inventory.

C. $35000 capital gain on sale of a capital asset. (which is a non depreciable business personality).

Explanation:

The taxpayer sold a painting to Reller Gallery for $6000. So, the tax payer amount and the character of tax payer gain or loss is as follows:

A. $6000 amount realized minus zero basis is equal to $6000 ordinary income on sale of a creative asset by the creator of the asset.

Reller Gallery sold the painting purchased by from Kara to a regular customer, Lollard Inc. for $10000. So, the tax payer amount and the character of tax payer gain or loss is as follows:

B. $10000 amount realized minus $6000 cost basis is equal to $4000 ordinary income on the sale of inventory.

Lollard Inc., the tax payer, was the regular customer that purchased the painting from the Reller Gallery. Lollard showed the painting in the lobby of its corporate headquarters until it sold "Shenandoah Skies" painting to a collector from Dallas. Where the collector paid $45,000 for the painting. So, the tax payer amount and the character of tax payer gain or loss is as follows:

C. $45000 amount realized minus $10000 cost basis is equal to $35000 capital gain on sale of a capital asset. (which is a non depreciable business personality).

3 0
3 years ago
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grin007 [14]

Answer:

$50,000

Explanation:

Recognized gain can be calculated by deducting the exclusion available from the realized gain. To qualify for exclusion from the realized gain Sanders has met all the requirements of exclusion.

NOTE: Requirments for exclusion are given at the end of solution

DATA

Sale proceeds = $500,000

Cost basis = $200,000

exclusion available for single person = $250,000

Gain =?

Calculation

Realized gain on sale of home = Sale proceeds –  Cost basis

Realized gain on sale of home = $500,000 - $200,000

Realized gain on sale of home =  $300,000

Recognized gain = Realized gain - exclusion available

Recognized gain = $300,000 - $250,000

Recognized gain = $50,000

Requirements for exclusion

1. You've owned the home for two of the last five years.  

2. You used the home as your principal residence for two of the last five years.

3. You haven't used the exclusion on another property sale within the last two years.

5 0
3 years ago
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