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Crazy boy [7]
3 years ago
9

West Street Automotive is considering adding state safety inspections to its service offerings. The equipment necessary to perfo

rm these inspections will cost $551,000 and will generate cash flows of $193,000 over each of the next five years. If the cost of capital is 17 percent, what is the MIRR on this project
Business
1 answer:
Over [174]3 years ago
6 0

Answer:

19.7%

Explanation:

The modified internal rate of return is a capital budgeting method used to determine the profitability of an investment. The MIRR assumes that cash inflows are reinvested at the firm's cost of capital and outflows are financed at the firm's financing cost.

MIRR = (Future value of a firm's cash inflow / present value of the firm's cash outflow)^ (1/n)  - 1

Future value = payment x[ (1 + interest rate)^n - 1 ] / interest rate

$193,000 x (1.17^5) - 1 / 0.17 = 1353779.24

1353779.24 / $551,000) ^0.2 - 1 = 19.7%

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February 1, 2018, Salisbury Company purchased land for the future factory location at a cost of $112,000. The dilapidated buildi
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Answer:

The cost of the land should be recorded as $108,350

Explanation:

Land cost =                                     $112,000

Demolition dilapidated building = $2,200

Legal fees - title search =               $1,450

Cost of land = Land cost - Demolition dilapidated building - Legal fees - title search

Cost of land = $112,000 - $2,200 - $1,450

Cost of land = $108,350

6 0
3 years ago
A deduction is money taken out of the paycheck for
evablogger [386]
For ......................Income tax
5 0
2 years ago
KTZ manufactures and distributes cutting edge hockey equipment. It has decided to streamline some of its operations so that it w
Nady [450]

Answer:

Consider the following explanations and calculations

Explanation:

part 1

a)  KTZ sold an office building for $85,000 in cash. It originally bought the office building seven

years ago for $59,000 and has taken $14,000 in depreciation.-

Ans- Bookvalue on date of sale= $59000- $ 14000= $ 45000

Profit on sale of office building= $85000- $45000= $40000

As per section 1231, out of profit of $40,000, amount of $14000, i.e till the amount of depreciation will be an ordinary income and $26000 (40000-14000) will be considered capital income.

b)

KTZ sold another machine for $6,200. It originally purchased this machine six months ago for

$9,000 and has claimed $1,230 in depreciation expense against the asset.

Ans- As the asset was held for less than one year, the provision of section 1230 will not apply. Thus, the loss will be treated as ordinary loss. The amount of ordinary loss =cost-depreciation-salesprice=9000-1230-6200= $1570

c)

KTZ sold some of its inventory for $5,000 cash. This inventory had a basis of $8,000

Ans-Section 1230 will not be applied to inventories. Thus ordinary profit of $3000 (8000-3000) will be considered.

d)

KTZ held stock in XYZ Corp., which had a value of $19,000 at the beginning of the year. That

same stock had a value of $25,230 at the end of the year.

Ans- Stock is treated as lower of market value or cost, hence no treatment, willl be shown at $19000

e)

KTZ sold a machine that it used to make computerized dies for $26,300 cash. It originally bought

the machine for $16,200 three years ago and has taken $4,000 depreciation

Ans- Bookvalue of computer- 16200-4000= $12,200

Profit= 26300- 12200= $14100

As per section 1231, out of profit of $14,100, amount of $4000, i.e till the amount of depreciation will be an ordinary income and $10100 (14100-4000) will be considered capital income.

part 2

Net section 1231 gain=26,000 + 10100= $ $36100

Ordinary gain= 14000+3000+4000= $21000

Ordinary loss= $ 1570

5 0
3 years ago
Today, your paint line must produce 4950 gallons of beige paint. Your four step manufacturing process has the following scrap ra
Eddi Din [679]

Answer:

For paint line to must produce the 4950 gallons of beige paint, it needs total of 5174.1 Kg. It accounts for the factors which are mentioned in the question . Explanation for this is attached in the image.

Explanation:

Explanation is in the attached image.

7 0
3 years ago
Rowell Company spent $3 million two years ago to build a plant for a new product. It then decided not to go forward with the pro
ELEN [110]

Answer:

B. If the building could be sold, then the after-tax proceeds that would be generated by any such sale should be charged as a cost to any new project that would use it.

Explanation:

The proceeds from a potential sale are the opportunity cost of using the building for a given project instead of selling to a third party. Not including any cost will lead to project not recovering the entire capital used in it.

Is important to notice this is the after-tax proceeds from the sale of the building.

3 0
3 years ago
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