that the company should be willing to pay for the fleet of cars with all-equity funding is the price that makes the NPV of the transaction equal to zero. The NPV equation for the project is: NPV = –Purchase Price + PV[(1 – tC )(EBTD)] + PV(Depreciation Tax Shield) If we let P equal the purchase price of the fleet‚ then the NPV is: NPV = –P + (1 – .35)($140‚000)PVIFA13%‚5 + (.35)(P/5)PVIFA13%‚5 Setting the NPV equal to zero and solving for the
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Using straight-line depreciation‚ what is the asset’s carrying value (book value) after 2 1/2 years? a. $8‚750. b. $12‚250. c. $14‚583. d. $16‚250. 2. On January 1‚ 2003‚ Superior Landscaping Company paid $17‚000 to buy a stump grinder. If Superior uses the grinder to remove 2‚500 stumps per year‚ it would have an estimated useful life of 10 years and a salvage value of $4‚500. The amount of depreciation expense for the year 2003‚ using units-of-production depreciation and assuming that
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HARVARD BUSINESS SCHOOL CASE STUDY DEPRECIATION AT DELTA AIR LINES ACCOUNTING ( SHAC 1033 ) 2014/2015 SEMESTER 1 GROUP MEMBERS : MOHD AMMARUL HAZIQ BIN SAIDIN A14HA0057 NURSAIDA SYAMIM BINTI FAUZI A14HA0136 NORHAMIZAH BINTI ABDUL HAMID A14HA0095 FATIN RAIHANAH BINTI MOHAMED RABEI A14HA0024 FOR: EN. KAMARUZZAMAN BIN ABDUL RAHIM FACULTY OF MANAGEMENT UNIVERSITI TECHNOLOGI
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Answer all questions Question 1 An industrial product may be manufactured by two methods of production. Using Method X‚ fixed costs are RM6‚540‚000 per period and variable costs are RM57 per unit. Using Method Y‚ fixed costs are RM7‚800‚000 per period and variable costs are RM45 per unit. a) Calculate the level of output per period for which the total costs are the same. (3 marks) b) Calculate the total cost per period for Method X at this output. (2 marks) c) State
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investment E11-4. Book value and recaptured depreciation Answer: Book value $175‚000 Recaptured depreciation E11-5. $124‚ 250 $50‚750 $110‚000 $50‚ 750 $59‚250 Initial investment Answer: Initial investment purchase price installation costs – after-tax proceeds from sale of old asset change in net working capital $55‚000 $7‚500 – $23‚750 $2‚000 $40‚750 CAPITAL BUDGETING PROBLEMS: CHAPTER 11 Solutions to Problems Note: The MACRS depreciation percentages used in the following problems
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Inflation is assumed Chapter 1 True / False Questions 1. Inflation is assumed to be a temporary problem that does not affect financial decisions. FALSE 2. Financial Capital is composed of long-term plant and equipment‚ as well as other tangible investments. FALSE 3. Real Capital is composed of long-term plant and equipment. TRUE 4. During the 1930s‚ financial practice revolved around such topics as the preservation of capital‚ maintenance of liquidity‚ reorganization
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which will result in the increasing of annual depreciation by $20‚000. As a result‚ the cost on factory equipment depreciation is increased from 60‚000 to 80‚000. Cost of Goods Sold is increased from 1‚770‚000 to 1‚790‚000‚ and the net income is reduced from 41‚000 to 28‚520 Case2: This action indicates the effect of renovation of factory building‚ which will result in the increasing of annual depreciation by $25‚000. As a result‚ the cost on depreciation on factory building is increased from 125‚000
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. . . . . . . . . $ 7‚000 Accounts receivable . . . . . . . . . . . . . . . . . . . 16‚500 Office supplies . . . . . . . . . . . . . . . . . . . . . . 2‚000 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170‚000 Accumulated depreciation—Trucks . . . . $ 35‚000 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75‚000 Accounts payable . . . . . . . . . . . . . . . . . . . . . 11‚000 Interest payable . . . . . . . . . . . . . . . . . . . . . . 3‚000 Long-term notes
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CHAPTER 21 ACCOUNTING FOR LEASES CONTENT ANALYSIS OF EXERCISES AND PROBLEMS Time Range (minutes) 5-10 Number E21-1 Content Operating Lease. (Easy) Annual rental payments‚ no renewable option clause‚ executory costs. Lessee’s journal entries to record agreement‚ payments‚ expenses. Capital Lease. (Moderate) Calculation of rental payments made at end of year. Table summarizing lease payments‚ interest expense. Journal entries. IFRS differences. Capital Lease. (Moderate) Payments made at beginning
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|1 |The time period assumption states that |D | | |a. a transaction can only affect one period of time. | | | |b. estimates should not be made if a transaction affects more than| | | |one time period. | | | |c. adjustments to the enterprise ’s accounts can only be made in | | | |the time period when the business terminates its operations. | | | |d. the
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