any sold a piece of land for $39,000 that had originally cost $32,500. This event would: Multiple Choice increase cash flows from investing activities by $39,000. not affect operating income. increase net income by $6,500.
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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- Eddie Corporation is considering the following three investment projects (Ignore income taxes.): Project D $ 65,600 $ 76,096 Multiple Choice Investment required Present value of cash inflows Rank the projects according to the profitability index, from most profitable to least profitable. O E, C, D E, D, C D, C, E Project C $ 57,600 $ 63,936 C, E, D. Project E $ 136,000 $ 148,240Azimuth Company was considering the purchase of equipment. Details on the equipment are as follows: Year Original Investment Cash Flow 0 $200,000 1 $ 40,000 2 40,000 3 60,000 4 40,000 5 60,000 6 30,000 What is the payback period in years, assuming no taxes are paid? Group of answer choices 5.00 4.00 3.85 4.33tch Do not do any interim rounding, state your answer to two decimal places. Dawntreader Landscaping is considering purchasing $490,000 of new lawn equipment and they anticipate the additional equipment will result in cash flows as below. Their weighted average cost of capital is 10.30%. Year Cash flow 1 87,000 113,000 3. 129,000 4. 146,000 162,000 The profitability index for the project is:
- Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments: Compute the missing information pertaining to each investment proposal. (Round your percentage answer to 1 decimal place. Omit the "$" & "%" signs in your response.) A B C D Investment cost $ 48,000 $ 30,000 $ 49,000 $ Estimated salvage value 8,000 5,000 2,000 Average estimated net income 5,000 5,600 4,500 Return on average investment % 24 % 20 % 20 %A machine with a cost of $143,000 and accumulated depreciation of $98,000 is sold for $56,500 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: Multiple Choice $11,500. $45,000. Zero. This is a financing activity.Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: Des Moines Cedar Rapids Total present value of net cash flow $ 712,500 (750,000) $(37,500) $ 848,000 (800,000) $ 48,000 Amount to be invested Net present value a. Determine the present value index for each proposal. - Which location does your analysis support? Explain. b.
- Garrison Company has two Investment opportunitles. A cash flow schedule for the Investments Is provided below: Year Investment A Investment B $(4,900) 1,960 1,960 1,960 $(5,850) 2,940 2 1,960 1,960 4 1,960 980 Considering the unequal Investments, which of the following techniques would be most approprlate for choosIng between Investment A and Investment B? Multiple Choice Payback method Present value index Net present value method None of these answers is correctConsidering the residual value is zero, calculate the payback period. The following details are provided by Doppler Systems: $700,000. The company's management has estimated that the equipment will generate A. Paramount Carpets Company is considering purchasing new equipment costing 8. Choice (You must choose 6 questions from among #’s 5-13 to answer): А. cash flows as follows: Year Net Cash Flow $200,000 1 200,000 250,000 250,000 150,000 В. Initial investment PV of cash inflows Payback period (years) NPV of project Project A $420,000 $570,000| Project B $200,000| $380,000 Project C $550,000| $800,000 Project D $500,000 $390,000 2.0 4.0 3.6 3.2 -$110,000 $250,000| $150,000 $180,000| Oppler can fund only ONE of the four projects, which one should they fund ANL WHY? (hint; consider the profitability indices) 2345Carmel Corporation is considering the purchase of a machine costing $45,000 with a 4-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment? Multiple Choice $28,125. O $22,500. $45,000. $14,063. $11,250.
- Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments. Compute the missing information pertaining to each investment proposal. (Round your percentage answer to 1 decimal place (i.e., 0.123 to be entered as 12.3).) Investment cost Estimated salvage value Average estimated net income Return on average investment $ A 46,000 10,000 10,000 % $ B 45,000 5,000 4,500 18 % $ C 51,000 5,600 20 % D 2,000 4,500 20 %Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$43,500 -$43,500 1 21,400 6,400 2 18,500 14,700 3 13,800 22,800 4 7,600 25,200 What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11 percent, what is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule? Over what range of discount rates would the company choose project? A? Project B? At what discount rate would the company be indifferent between these two projects? Explain.Use Given-Required-Solution in answering problems. Provide cash flow diagram as necessary. Answers should be rounded off to two decimal places and enclosed in a box. Write answer on the space provided below. Solution shall be uploaded at the end of the quiz. The price of a system of jockey pumps is P6,000,000. PLM decided to purchase this system and spent P215,500 for shipping and installation. The equipment will last for 10 years with a salvage value of 3% of its total cost. Determine the following: a. Yearly charge of depreciation using SL method. b. Respective depreciation charges on the 6th year and 8th year, and book value at the end of 8th year using SYD method