CURRENCY DEPRECIATION AND ITS IMPACTS Devaluation means decreasing the value of nation’s currency relative to gold or the currencies of other nations. Devaluation occurs in terms of all other currencies‚ but it is best illustrated in the case of only one other currency. Devaluation and Depreciation are sometimes used interchangeably‚ but they always refer to values in terms of other currencies and the value of currency is determined by the interplay of money supply and money demand. In common modern
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A Case Study on Pressco‚ Inc. (1985) Submitted by: Cherry Ann Abangtao Maricor Quilnat Hyacinth Mae Yarcia Jan Joseph Tayzon 4BSA Financial Management II History Jane Rogers‚ a marketing representative of Pressco Inc.‚ was attempting to sell mechanical drying equipments to Paperco but was unsuccessful in her efforts. However‚ in November 1985 new tax legislation had been rumored that gained the interest of Paperco to buy new equipments. This gave Jane Rogers the
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$130‚000 is expected to generate annual cash inflow of $32‚000 for 6 years. Depreciation is allowed on the straight line basis. It is estimated that the project will generate scrap value of $10‚500 at end of the 6th year. Calculate its accounting rate of return assuming that there are no other expenses on the project. Solution Annual Depreciation = (Initial Investment − Scrap Value) ÷ Useful Life in Years Annual Depreciation = ($130‚000 − $10‚500) ÷ 6 ≈ $19‚917 Average Accounting Income = $32‚000
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Company Information Wheel Industries is considering a three-year expansion project‚ Project A. The project requires an initial investment of $1.5 million. The project will use the straight-line depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per year before tax and has additional annual costs of $600‚000. The Marginal Tax rate is 35%. Wheel has just paid a dividend
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through 5 and how do these cash flows differ from accounting profits or earnings? Free cash flows differ from accounting profits because they incorporate depreciation back into the equation. It is important to add back in the depreciation expense‚ since the item was actually purchased using cash previously and depreciation is not a cash-flow (Titman‚ Keown‚ & Martin‚ 2011). Free cash flows also look at the Capital Expenditures (CAPEX) and Working Capital. The CAPEX includes initial project
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Historical Cost the company carries the asset on the balance sheet at the purchase cost less any depreciation taken. At the time of sale‚ the company records a gain or a loss against the purchase cost of an asset less any depreciation if applicable. For example if Tom purchased an asset for $5‚000 and estimated depreciation expense of $500 per yr for 10 yrs the cost of asset after the 1st yr less depreciation is $4500. If the market value of the asset were $4800 after one year in the open market Tom
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The controller’s bonus is based on the next income. It is the controller’s belief that the switch in inventory methods would increase the net income of the company. What are the differences between the LIFO and FIFO methods? D2: A variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the
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Homework of Corporate Finance The 3rd Week 【Corporations】 What is the primary disadvantage of the corporate form of organization? Name at least two advantages of corporate organization. Answer: The primary disadvantage of the corporate form is the double taxation to shareholders of distributed earnings and dividends. Advantages include: limited liability; ability to raise capital; and unlimited life 【Agency Problem】 Who owns a corporation? Describe the process whereby the owners control
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allocated to CM‚ divisional managers argue the case for their desired level of capital expenditure. Once capital expenditure has been authorized DMs manage the investment and the division benefits from it. It is therefore appropriate to treat the depreciation expense and the investment cost associated with a division’s non-current assets as ‘controllable’ | Grain DM | Bakery DM | ROCE | Reject | Accept | RI | Accept | Accept | Divisional Profit | Accept | Accept | * RI is the best measure
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the decision to shut down the Denver Plant: 1. Blanket order had been placed with major suppliers to ensure sufficient supply for the coming year. Disadvantage: if order were cancelled due to the closing‚ termination charges of 15 % of direct material or $4‚000‚000 would have to be paid off. 2. 400 plant employees would be laid off Disadvantage: Employees may not be able to find a handsome rewarding job matching Denver‚ which is the highest in the area and Denver has the obligation to source
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