Answer: a rate commensurate with the risk level of the project.
Explanation:
When computing the net present value of the new project, we should note that the cash flows should be discounted using a rate that is commensurate with the risk level of the project.
Since it is a new project and it possesses risks that are unrelated to those of the current firm's product, the risk that pertains to the project level should be used in the discounting to get the net present value.
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The type of financial institution
is Home-Equity Lines. Home-Equity Lines of Credit. Works like a credit card. A
certain spending limit is pre – approved to the borrowers and can withdraw money
when they need via the credit card.
Based on this information, it can be concluded that Kelli's firm has a MATRIX structure.
Matrix structure refers to an organization structure in which the reporting relationships are set up as a matrix, that is, employees usually have dual reporting relationships, one to a functional manager and the other to a product manager.
Answer:
Acquisition of the asset:
March 1, 2016
Dr. Patent €7,500
Cr. Cash €7,500
At Year end:
December 31, 2016
Dr. Patent €1,500
Cr. Revaluation reserve €1,500
December 31, 2017
Dr. Revaluation reserve €1,000
Cr. Patent €1,000
Explanation:
*Assumption: Normally Patents do not valued under the revaluation model as they are very unique and do not have any active market. Because it given in the question I am assuming it fulfil the criteria of revaluation.
On March 1, 2016 patent will be recognized on cost. At the year end patent will be revalued and it's gains and losses are calculated. Dec 31, 2016 there is a gain of €1,500 which is transferred to revaluation reserve account. Dec 31, 2017 there is a revaluation loss which will firstly adjust any previous accumulated gain then it will be charged to Profit and loss as Revaluation loss. As there is excess gain of €1,500 and entire loss of €1,000 will be adjusted in the revaluation reserve account.