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- On 2020 05 15 Nunda Phenol Products (NNDPP) purchased a small chermical refinery. The accountants estimated that the present cost to retire that asset at the end of June in 2040 (its scheduled end of life) would be $3.540 m. Chemical industry expert Josiah Carberry forecasts a 2.7% rate of inflation for the necessary work, and that a contractor would include $620 K MRP to lock in the price of doing the work twenty years in the future. The risk-free rate (rF) was 2.2 % and NNDPP's credit standing commanded a 310 bps spread to rF. Sarah Verhovek, the NNDPP controller, calculates ARO liabilities using continuous discounting and the 30/360 convention. For the ARO, she will book a Cr. of ($ m) O 2.635 O 2.236 O 2.553 O 2.474 O 3.450Current Attempt in Progress At the end of 2025, Windsor Company is conducting an impairment test and needs to develop a fair value estimate for machinery used in its manufacturing operations. Given the nature of Windsor's production process, the equipment is for special use. (No secondhand market values are available.) The equipment will be obsolete in 2 years, and Windsor's accountants have developed the following cash flow information for the equipment. Year 2026 2027 2027 Net Cash Flow Estimate $6,540 8,690 $(470) 2,060 3,600 Scrap value $500 910 Probability Assessment 40% 60% 20% 60% 20% 50% 50% Click here to view factor tables. Using expected cash flow and present value techniques, determine the fair value of the machinery at the end of 2025. Use a 4% discount rate. Assume all cash flows occur at the end of the year. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) Fair value of the machinery at the end of 2025 $A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A: Purchase Cost of Equipment 703,668700,000 Salvage Value 100,454100,000 Daily operating cost 501500 Economic life, years 10 Alternative B: Rental at 1,5751,500 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.
- Modified Accelerated Cost Recovery System (MACRS) (LO 8.2) Calculate the following: Click here to access the various depreciation tables. If required, round your final answers to the nearest dollar. If your answer is zero, enter "0" b. The second year (2021) of depreciation on a computer that cost $5,000 purchased in May 2020, using the half-year convention and accelerated depreciation considering any bonus depreciation taken.$fill in the blank 41b92bfaafa5018_1 c. The first year of depreciation on a computer costing $2,800 purchased in May 2020, using the half-year convention and straight-line depreciation with no bonus depreciation.$fill in the blank dfbf18f8d052045_1On December 15, 2023, an employee filed a lawsuit against Bojack Company for damages suffered when one of Bojack’s equipment malfunctioned in August of 2023. The legal counsel of the company believes that it is probable that Bojack will pay the following damages: Probability Estimated Litigation Cost 50% P400,000 30% 700,000 20% 550,000 Bojack Company provided a 10% risk adjustment factor. Using the expected value method, how much is the provision that should be recognized by Bojack Company on December 31, 2023?View Policies Current Attempt in Progress FITCO is considering the purchase of new equipment. The equipment costs $347000, and an additional $115000 is needed to install it. The equipment will be depreciated straight-line to zero over a 5-year life. The equipment will generate additional annual revenues of $271000, and it will have annual cash operating expenses of $84000. The equipment will be sold for $82000 after 5 years. An inventory investment of $70000 is required during the life of the investment. FITCO is in the 40 percent tax bracket, and its cost of capital is 11 percent. What is the project NPV? O $73326. $90020. O $41987. O $57327.
- A manufacturer is contemplating the purchase of either of two machines at a cost of Kshs 155 million and Kshs 180 million respectively. The machines will generate cashflows receivable at the end of each respective year as follows. Machine B cashflows (millions) cashflows (millions) a) Year Machine A 1 55 90 2 35 85 3 (35) 55 4 68 46 72 37 41 Machine A has an estimated salvage value of Kshs 10 million at the end of year six. Machine B would cost jambo an estimated Kshs 10 million to dispose off at the end of year five. Jambo has a cost of capital of 15 percent per annum. i) Using NPV approach, advice jambo as to which of the machines it should invest in. ii) Due to the likelihood of technological changes, jambo would prefer to invest in exceeding four years. Using the discounted payback approach, which machine if any should jambo invest in. machines with a payback period not iii) When is the modified IRR appropriate to be used in capital budgeting decisions Swipe up for filters Add a…A factory manager is considering the purchase of one of the following two production equipment. Cash flow estimates for equipment A are in year-zoro dollars while those of equipment B are in actual dollars Equipment A (year-zero S) Equipment B (actual $) $1,200 Initial investment $9,500 Net annual revenue $3.000 $4,000 $0 Market value at end of useful life Useful ife, years 11 11 The manager uses a market interest rate of 12% per year. If inflation rate is expected to average 5.66% per year over the next several years, determine the PW of each equipment. 1. The PW of Equipment A is OA. S14,161 OB. $14,578 OC. $12,500 OD. $0,313 2. The PW of Equipment B is O A. $20,347 OB. S15,200 OC. $20,903 OD. $12,651Q2b. Knives Out Co. is considering when to replace its old machine. The company faces 2 options: (1) replace the old machine now, or (2) replace it at the end of six years. Currently, the old machine has a salvage value of $3 million and a book value of $1.5 million. If the machine is not sold, it will require maintenance costs of $775,000 over the next six years at the end of the year. The depreciation expense for the machine is $300,000 per year. At the end of six years, the machine will have a salvage value of only $100,000 and a book value of $0. If the company replaces the old machine now, the new machine will cost $4.8 million and will require maintenance costs of $320,000 at the end of each year during its economic life of six years. At the end of six years, the new machine will have a salvage value of $900,000. It will be fully depreciated by the straight-line method. If Knives out to replace the old machine in six years, a replacement machine will cost $3.4 million. The…
- BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Machine A Machine B Original cost $75,700 $182,000 Estimated life 8 years 8 years Salvage value Estimated annual cash inflows $20,300 $39.700 Estimated annual cash outflows $4.870 $10.050 Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to O decimal places, eg. 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Machine B Net present value Profitability index Which machine should be purchased? should be purchased.B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $312,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income (a) Compute the annual net cash flow. (b) Compute the payback period. (c) Compute the accounting rate of return for this equipment. $ 195,000 104,000 26,000 19,500 $ 45,500 Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the annual net cash flow. Annual Results from Investment Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income Net cash flow Income Cash Flow $ 195,000 104,000 26,000 19,500 $ 45,500 $ 0A company is planning to purchase a new machine to expand its production. The machine is costing OMR 10000. The following cash inflows are expected to come. Calculate pay back period for Machine A and Machine B Years Machine A Machine B 1 2400 5200 2 3600 4800 5800 7800 4 6000 8600 Select one: а. Machine A: 2 years 8 months; Machine B= 3 years b. None of the options Ос. Machine A: 2 years 8 months Machine B=2 years d. Machine A: 3 years; Machine B= 2 years е. 3.