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tensa zangetsu [6.8K]
3 years ago
15

Two oil wells are for sale. The first will yield payments of $9,300 at the end of each of the next 15 years, while the second wi

ll yield $7,000 at the end of each of the next 28 years. Interest rates are assumed to hold steady at 3.5% per year over the next 28 years. Which has the higher present value?
Business
1 answer:
Zina [86]3 years ago
8 0

Answer:

The first oil well has a higher present value of $83,266.24 as compared to the present value of the second oil well of $74,804.25

Explanation:

Step 1: Determine the total yield for both oil wells

Total yield of the first oil wells=Yield payments per year×number of yield years

where;

Yield payments per year=$9,300

Number of yield years=15

replacing;

Total yield of the first oil wells=(9,300×15)=$139,500

The future value of the first oil well=$139,500

Total yield of the second oil well=Yield payment per year×number of yield  years

where;

Yield payments per year=$7,000

Number of payment years=28

replacing;

Total yield of the second oil well=(7,000×28)=$196,000

The future value of the second oil well=$196,000

Step 2: Determine the present value of the two oil wells

First oil well present value=Future value/(1+r)^15

r=3.5%=3.5/100=0.035

First oil well present value=$139,500/(1+0.035)^15

=139,500/(1.035^15)=83,266.24

The present value of the first oil well=$83,266.24

Second oil well present value=Future value/(1+r)^28

r=3.5%=3.5/100=0.035

Second oil well present value=$196,000/(1+0.035)^28

=196,000/(1.035^28)=74,804.25

The present value of the second oil well=$74,804.25

The first oil well has a higher present value of $83,266.24 as compared to the present value of the second oil well of $74,804.25

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When a company produces​ 5,000 units, total costs equal​ $150,000 and total variable costs equal​ $75,000. At this level of​ out
Marrrta [24]

Answer:

$15

Explanation:

Average fixed cost = Total fixed cost / quantity

Total fixed cost = Total cost - Total variable cost

= $150,000 - $75,000 = $75,000

Average fixed cost = $75,000 /5000 = $15

I hope my answer helps you

7 0
3 years ago
During March, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,0
OLEGan [10]

Complete question:

You have just been hired by SecuriDoor Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

      After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for April:

                                          Actual Cost in April

 Utilities    $16,700 plus $.14 per machine-hour      $ 21,020    

 Maintenance   $38,300 plus $1.50 per machine-hour   $ 59,100    

 Supplies      $.40 per machine-hour          $ 7,000    

 Indirect labor  $94,700 plus $1.80 per machine-hour   $ 128,000    

 Depreciation   $68,400    $ 70,100  

During March, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000 machine-hours during March.

Solution:

1. The activity variances are shown below:

                              SecuriDoor Corporation

                                   Activity Variances

                         For the Month Ended March 30

                                Planning Budget    Flexible Budget    Activity  Variances

Machine-hours (q)          18,000                16,000  

Utilities ($16,700 + $.14q)   $ 19,220         $ 18,940               $ 280   F

Maintenance ($38,300 + $1.50q)  65,300     62,300           3,000   F

Supplies ($.40q)               7,200                6,400                 800   F

Indirect labor ($94,700 + $1.80q)  127,100     123,500       3,600   F

Depreciation ($68,400)    68,400           68,400           0     None

Total                                $ 287,220       $ 279,540              $ 7,680   F

2. The spending variances are computed below:

                               SecuriDoor Corporation

                              Spending Variances

                          For the Month Ended March 30

                                    Flexible Budget    Actual Results  Spending Variances

 Machine-hours (q)         16,000                16,000  

Utilities ($16,700 + $.14q)   $ 18,940         $ 21,020           $ 2,080   U

Maintenance ($38,300 + $1.50q)  62,300     59,100        3,200   F

Supplies ($.40q)               6,400                7,000                600   U

Indirect labor ($94,700 + $1.80q)   123,500     128,000     4,500   U

Depreciation ($68,400)     68,400           70,100                1,700   U

Total                               $ 279,540            $ 285,220  

8 0
3 years ago
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Arturiano [62]

Answer:

$69,075

Explanation:

James Corporation

Merchandise remaining in James’s inventory:

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Intra-entity gross profit:

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James’s ownership percentage of Carl will have no impact on this computation.

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What are checks?
LiRa [457]

Answer:

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7 0
3 years ago
What is break even point?
maks197457 [2]

Answer:

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Explanation:

6 0
3 years ago
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