The answer to the given situation is "the result of this oversight is that the liabilities are understated".
We can define understated as if someone say to you that your account is understated, it means that either the amount is incorrect or the amount is too small or it is less than the actual or true amount. In the given case the entry was not made due the understatement of liabilities.
When a qualified plan starts making payments to its recipient the gains are taxable. Gains are the profit/return that are made from an investment. A gain can be something you make from a sale or or inheritance. Gains are typically taxed in a higher tax bracket as well.
Answer:
(a) What is the net present value of this potential investment?
Net present value of Investment is $(3,903)
(b) Should you invest in this machine?
We should not invest in this investment because Net present value of this investment is negative by discounting Minimum acceptable rate of return.
Explanation:
Present Values:
Revenue $144,146
O&M Cost ($48,049)
Initial Investment <u>$(100,000)</u>
Net Present value $(3,903)
Working :
Present Value Calculation = P x ( (1- ( 1 + r )^-10) / r
Revenue = $21,000 x ( (1- ( 1 + 0.075 )^-10) / 0.075 = 144,146
O&M Costs = $7,000 x ( (1- ( 1 + 0.075 )^-10) / 0.075 = 48,049
Answer:
it got a little hard to understand at the end but from what read, I'll say it's true...