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Novay_Z [31]
3 years ago
6

Annual maintenance costs for a particular section of highway pavement are $2500. The placement of a new surface would reduce the

annual maintenance cost to $500 per year for the first 3 years and to $1000 per year for the next 7 years. After 10 years the annual maintenance would again be $2500. If maintenance costs are the only saving, what investment can be justified for the new surface? Assume interest at 5%.
Business
1 answer:
rewona [7]3 years ago
6 0

Answer:

The maximum investment is $6,360.111

Explanation:

Giving the following information:

The placement of a new surface would reduce the annual maintenance cost to $500 per year for the first 3 years and to $1000 per year for the next 7 years. After 10 years the annual maintenance would again be $2500.

We need to find the net present value. The maximum initial investment will be the amount that makes the NPV cero.

NPV=∑[Cf/(1+i)^n]

Cf= cash flow

<u>For example:</u>

Year 1= 500/1.05= 476.19

Year 3= 500/1.05^3= 431.92

Year 5= 1,000/1.05^5= 783.53

NPV= 6,360.111

The maximum investment is $6,360.111

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Answer:

Explanation:

1. The journal entries are shown below:

On December 1

Cash A/c Dr $1,260

     To  Deferred Service Revenue $1,260

(Being cash is received)

On December 31, 2016

Deferred Service Revenue $420                 ($1,260 ÷ 3 months)

      To Service revenue                    $420

(Being service revenue is recorded)

2. Income statement

Earned income from car washing services    $420

Balance sheet

Assets

Cash              $1,260

Liabilities

Deferred Service Revenue       $840        ($1,260 - $420)

7 0
3 years ago
Classify the following cash flows as either operating, investing, or financing activities assume indirect method.1. Received cas
liq [111]

Answer and Explanation:

The classification is as follows

1. Investing activities  : Since there is cash received from the sale of equipment so the same is to be shown in the investing activities in a positive amount

2. Investing activities : Since there is cash paid for buy the long term investment so the same is to be shown in the investing activities in a negative amount

3. Financing activities : Since the cash is received so the same is to be shown in the financing activities in a positive amount

4. Financing activities  : Since the issuance of preferred stock is there so the same is to be shown in the financing activities in a positive amount

5. Financing activities  : Since the cash is paid so the same is to be shown in the financing activities in a negative amount

6. Operating activities : Since the cash is received so the same is to be shown in the operating activities in the direct method as a positive amount  

7. Operating activities  : Since the inventories are purchased so the same is to be shown in the operating activities in the direct method as a negative amount  

8. Operating activities : Since the cash is paid so the same is to be shown in the operating activities in the direct method as a negative amount  

9. Operating activities  : Since the cash is paid so the same is to be shown in the operating activities in the direct method as a negative amount  

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2 years ago
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Answer:

One company pays 100%, the other re-reimburses 50%  

Explanation:

If an environmental assessment found that the two companies share joint and several liability for a hazardous materials cleanup.

What could happen if the two of them don't agree to cooperate in the cleanup is that one of the companies will eventually settle the costs fully while the other party will have to reimburse the party that pays, 50%.

The paying company could make claims because the environmental impact assessment has already found both companies jointly liable. hence each company ought to jointly share the costs

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Since the value of US dollar is still high then the supply will be high in the market, but with the expectation of future fall, demand will be low because buyers are waiting for drop in value. There will be excess supply and lower demand.

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