Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $416,000. Of this sum, $52,00 is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit t company to treat this cost as a tax-deductible current expense or as a capital investment. In the latter case, the company could depreciate the $52,000 straight-line over 5 years. The tax rate is 30% and the opportunity cost of capital is 5%. a. What is the present value of the cost of the kiln if the installation cost is treated as a separate current expense? b. What is the present value of the cost of the kiln if the installation cost is treated as a part of the capital investment? (Round your answer to the nearest whole dollar amount.) a. Present value b. Present value
Q: a. What is the net present value of the project? (Negative amount should be indicated by a minus…
A: NPV.It is capital budgeting technique used to evaluate performance of projects.If NPV is positive,…
Q: What is the NPV of a project
A: In the 6th year the working capital invested will be drawn from project hence $5000 is shown in 6th…
Q: An investment of 100000 pesos yields 36238.49 pesos at the end of the 3rd year, 43774.27 at the end…
A: > Investment = 100000> 3rd year cash flow = 36238.49> 6th year cash flow = 43774.27>…
Q: You are operating an old machine that is expected to produce a cash inflow of $5,600 in each of the…
A: Equivalent annual cost refers to the cost incurred for owning, operating, and the maintenance of an…
Q: !DO NOT USE AI TO ANSWER THIS QUESTION. AI DOES NOT DO WELL IN FINANCE!! Thank you for not using AI.…
A: The intrinsic value is based on the underlying characteristics and fundamentals of the asset, rather…
Q: Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option…
A: Option A:Initial investment = $176,000Cash inflow = $71,500Annual cash outflow = $30,400Cost to…
Q: All of the following statements about life insurance company investments are true EXCEPT income from…
A: The objective of this question is to identify the statement that is not true about life insurance…
Q: 13 Consider the following returns for a portfolio of stocks that replicates the S&P 500 index that…
A: Variance is a statistical metric that gauges the degree of dispersion among data points in a…
Q: A loan of L is taken over ten years and will be repaid using the sinking fund method with equal size…
A: In the sinking fund method the borrower undertakes to pay back the principal of the loan at the end…
Q: Investment options A and B are equally risky and have identical initial costs. Each investment will…
A: We are given the following data -Cash inflow of each project$20,000Option A will pay five annual…
Q: Changing compounding frequency Using annual, semiannual, and quarterly compounding periods, (1)…
A: Future value can be defined as the value of a particular asset at a future date. Finding the future…
Q: What is the 2-year Zero Rate? What is the expected one-year interest rate two years from…
A: To calculate the 2-year zero rate, use the yield on the 2-year fixed coupon bond as a proxy. for the…
Q: After completing her estimate of Templeton's WACC, the CFO decided to explore the possibility of…
A: Weights :Debt = 0.375Common stock = 0.625Preferred stock = 0Cost:Debt = 0.06Common stock =…
Q: Bank with an interest of 12% compounded annually. You can pay off the debt in 4 years by paying $310…
A: Present value:Present value is a financial concept that refers to the current worth of a future sum…
Q: Suppose that the interest rates in the U.S. and Germany are equal to 5%, that the forward (one year)…
A: Foreign exchange rate is the rate at which the currency of one country can be exchanged for another…
Q: A firm considers to invest in two zero-coupon bonds (A and B) in order to cover for a selection of…
A: Bonds refer to the financial instruments with which periodic interest payment is attached and a…
Q: Depreciation and accounting cash flow A fim in the thed year of depreciating is only asset, which…
A: The objective of this question is to calculate the operating cash flow (OCF) for the current year…
Q: EBIT (Use cells A6 to B13 from the given information to complete this questio Output Area: $600,000…
A: As per M&M Proposition I, the share price is calculated by The value of all equity firm is The…
Q: 2. A firm plans to buy an asset for $100,000 and will completely depreciate the asset on a straight-…
A: Capital budgeting refers to the concept used for estimating the viability of the project using…
Q: A builder is offering $131,554 loans for his properties at 9 percent for 25 years. Monthly payments…
A: LoanLoan is referred to the amount borrowed by an individual from a bank, for his personal or…
Q: A firm has two mutually exclusive investment projects to evaluate. The projects have the following…
A: Making decisions about capital budgeting entails assessing and choosing capital expenditures or…
Q: Given this data, determine the expected NPV for this project if the appropriate cost of capital is…
A:
Q: Suppose that the current spot exchange rate is €0.80/$ and the three-month forward exchange rate is…
A: Degree of Operating leverage (DOL) for ZTech = 1+(Fixed cost /…
Q: future, Hanna deposits her $9,400 in an investment account in 2018 earning 4% interest compounded…
A: The time value of money recognizes the idea that the value of an amount of money today differs from…
Q: Ms. Dory asks Axis Bank to lend her Rs. 100 today. She says she will not be able to pay anything at…
A: The future value is a financial concept that represents the value of a sum of money at a specified…
Q: Fujita, Incorporated, has no debt outstanding and a total market value of $422,400. Earnings before…
A: The objective of the question is to calculate the earnings per share (EPS) under three different…
Q: What is the after announcment? This is from question a.
A: Debt Value = $2,700,000Current Debt-to-equity ratio = 30%Increased Debt-to-equity ratio = 50%EBIT =…
Q: Platinum contracts are trading at $950. NYMEX defines the Platinum contract as 50 ounces/c, $/c,…
A: The cost of carry is usually the cost of holding the contract until its maturity. It is often…
Q: Consider a 2-year, fixed rate mortgage with an original balance of $28,000 and an interest rate of…
A: Mortgage:A mortgage is a financial agreement between a borrower and a lender, where the borrower…
Q: You are choosing among three retirement funds. Alpha Fund has an expected return of 23% and a…
A: The funds are selected based on several parameters including expectations of return, tolerance of…
Q: Suppose you plan on retiring at the age of 35 (early retirement woooooooo!) and expect to live…
A:
Q: 1. Miss V is bullish about the stock of Ghana Commercial Bank (GCB). She is very confident in the…
A: “Since you have posted multiple questions with multiple sub parts, we will provide the solution only…
Q: What is the modified IRR?
A: Modified IRR= (Future value of Positive cashflow /Present value of negative cashflow)^(1/n)-1Future…
Q: Saucier & Co. currently sells 1,400 units a month for total monthly sales of $98,500. The company is…
A: Let new sales quantity be Q.Break even point =Q-1,400 units = (Monthly sales /{[(selling price -…
Q: The data associated with operating and maintaining an asset are shown below. The con manager has…
A: AW is the annual worth of machine and annual worth of machine includes the cost of owning and cost…
Q: Note: Do not round intermediate calculations and round your answers to 2 decimal Present Value $…
A: Future value is the sum of present value plus the amount of compounded interest accumulated over the…
Q: Find 11-month interest rate if the price of 5% bond maturing in 5 month is $99 and the price of 8%…
A: Yield to maturity is the rate of return realized on bond when bond is held till maturity of bond…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: Net present value:The “net present value” (NPV) is a financial metric used to assess the…
Q: An investor needs exactly 1 lakh after 2 years and has 2 bonds in mind with YTM of 10%. Bond A has…
A: Bonds are financial instruments that represent debt obligations issued by governments, corporations,…
Q: You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the…
A: The time value of money refers to the concept in which the value of money is considered to be…
Q: A stock in your portfolio has just paid a dividend of $0.50. You expect the dividend to grow to…
A: Dividend Discounted Model (DDM) is an financial approach that helps in computing the price of the…
Q: 7. Determine the P/E ratio of the company ZYX if you know that the number of company's outstanding…
A: A financial ratio called Price/Earnings (P/E) compares a company's market price per share to its…
Q: Suso a'ymonst, gainuani yd mes vam tan odi lliw inong doum wol Question 6 vani ristlichsupe. ne…
A: The objective of the question is to calculate the required returns for both Stock P and Stock Q, and…
Q: The relevant tax rate is 35%, and the required return is 15%. Based on these preliminary estimates,…
A: The NPV is calculated as shown in the table below:Year012345Initial Cost-21000000Working…
Q: An insurance policy pays $50,000 immediately or $4,000 every 6 months for 10 years beginning now.…
A: Interest rate refers to the charge at which the loan is to be provided by the lender to the borrower…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: NPV is defined as the sum of the present values of all future cash inflows less the sum of the…
Q: 1996 You are given the following information for two assets Uno and Dosle to sulav SIT Asset…
A: Systematic Risk: Systematic risk, also known as market risk, is the portion of an asset's risk that…
Q: You decide to fund your IRA at $6,000 per year for the next 40 years. How much will your account be…
A: Future value is a term used in finance to describe the estimated value, after compound interest, of…
Q: will allow you to earn more money. Which of the following is NOT an incremental cash f associated…
A: Incremental cash flow is the extra cash flow related to the given opportunity about which the…
Q: e. How much would she have to invest to have $46,900 after 9 years, assuming an interest rate of
A: The following formula to calculate the present value:PV = FV / (1 + i)^nWhere:PV = Present ValueFV =…
Step by step
Solved in 3 steps with 2 images
- Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $704,000. Of this sum, $88,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible current expense or as a capital investment. In the latter case, the company could depreciate the $88,000 straight-line over 5 years. The tax rate is 30% and the opportunity cost of capital is 5%. a. What is the present value of the cost of the kiln if the installation cost is treated as a separate current expense? b. What is the present value of the cost of the kiln if the installation cost is treated as a part of the capital investment? Give typing answer with explanation and conclusionMs. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $464,000. Of this sum, $58,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible current expense or as a capital investment. In the latter case, the company could depreciate the $58,000 straight-line over 5 years. The tax rate is 30% and the opportunity cost of capital is 5%. a. What is the present value of the cost of the kiln if the installation cost is treated as a separate current expense?b. What is the present value of the cost of the kiln if the installation cost is treated as a part of the capital investment?Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $496,000. Of this sum, $62,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible current expense or as a capital investment. In the latter case, the company could depreciate the $62,000 straight-line over 5 years. The tax rate is 30% and the opportunity cost of capital is 5%. a. What is the present value of the cost of the kiln if the installation cost is treated as a separate current expense?b. What is the present value of the cost of the kiln if the installation cost is treated as a part of the capital investment? (Round your answer to the nearest whole dollar amount.)
- Seved Help Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $560,000. Of this sum, $70,000 Is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible current expense or as a capital investment. In the latter case, the company could depreciate the $70,000 straight-line over 5 years. The tax rate is 30% and the opportunity cost of capital is 5%. a. What is the present value of the cost of the kiln if the installation cost is treated as a separate current expense? b. What is the present value of the cost of the kiln if the installation cost is treated as a part of the capital investment? (Round your answer to the nearest whole dollar amount.) a. Present value b. Present valueThe treasurer of New Semiconductor has a problem. The company has just ordered new assembly robotics for $3,500,000. The manufacturer would install the robotics for an additional $50,000. The treasurer does not know whether the Internal Revenue Service (IRS) will permit the company to treat this installation cost as a tax-deductible expense (end of Year 1) or view the installation as part of the capital investment. In the latter case, the company would capitalize the installation cost and depreciate the $50,000 along with the cost of the robotics according to the 5-year MACRS tax depreciation schedule: Year 1: 20% Year 2: 32% Year 3: 19.2% Year 4: 11.52% Year 5: 11.52% Year 6: 5.76% Assuming the tax rate is 35% and the discount rate is 5%, calculate: 1) the present value of the tax shields if the installation costs are expensed at the end of Year 1, and 2) the present value of the tax shields if the installation costs are capitalized and depreciated according to 5-year MACRS. a.…Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician whoinstalls wiring in new homes. Because the company’s financial statements are prepared only for taxpurposes, Jon uses the direct write-off method. During 2015, its first year of operations, TrevorsonElectronics sold $30,000 of services on account. The company collected $26,000 of these receivables during the year, and Jon believed that the remaining $4,000 was fully collectible. In 2016,Jon discovered that none of the $4,000 would be collected, so he wrote off the entire amount. Tomake matters worse, Jon sold only $5,000 of services during the year.Required:1. Prepare journal entries to record the transactions in 2015 and 2016.2. Using only the information provided (ignore other operating expenses), prepare comparativeincome statements for 2015 and 2016. Was 2015 really as profitable as indicated by its incomestatement? Was 2016 quite as bad as indicated by its income statement? What should Jon…
- Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician who installs wiring in new homes. Because the company's financial statements are prepared only for tax purposes, Jon uses the direct write-off method. During 2018, its first year of operations, Trevorson Electronics sold $28,400 of services on account. The company collected $25,200 of these receivables during the year, and Jon believed that the remaining $3,200 was fully collectible. In 2019, Jon discovered that none of the $3,200 would be collected, so he wrote off the entire amount. To make matters worse, Jon sold only $5,100 of services during the year. Required: 1. Prepare journal entries to record the transactions in 2018 and 2019. 2-a. Using only the information provided (ignore other operating expenses), prepare comparative income statements for 2018 and 2019. 2-b. Was 2018 really as profitable as indicated by its income statement? 2-c. Was 2019 quite as bad as indicated by its income…Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician who installs wiring in new homes. Because the company's financial statements are prepared only for tax purposes, Jon uses the direct write-off method. During 2018, its first year of operations, Trevorson Electronics sold $28,400 of services on account. The company collected $25,200 of these receivables during the year, and Jon believed that the remaining $3,200 was fully collectible. In 2019, Jon discovered that none of the $3,200 would be collected, so he wrote off the entire amount. To make matters worse, Jon sold only $5,100 of services during the year. Required: 1. Prepare journal entries to record the transactions in 2018 and 2019. 2-a. Using only the information provided (ignore other operating expenses), prepare comparative income statements for 2018 and 2019. 2-b. Was 2018 really as profitable as indicated by its income statement? 2-c. Was 2019 quite as bad as indicated by its income…Mr. Ben T. Lador, the Chief Accountant, availed of the car plan of Kiowa Company. Under the plan, he will shoulder only half of the cost of the car, with the company shouldering the other half. He paid P450,000 for the car. The car was registered in the name of Mr. Lador. Questions: 1. How much is the fringe benefit tax due? 2. How much is the deductible expense of Kiowa Company?
- T uses frequent flyer miles to take his family on a vacation. T received the miles duringbusiness travel paid for by his employer. The normal airfare for his vacation wouldhave cost $7,000.a. T must realize and recognize $7,000 as income.b. Although T has realized income, he will not be required to recognize it becausethe IRS has chosen, as a matter of administrative convenience, not to requiretaxpayers to recognize the value of frequent flyer tickets earned duringemployer-paid travel.c. Had T earned the frequent flyer miles during travel he had paid for himself, theissue of income realization and recognition would not arise.d. Both (a) and (c) are correct.e. Both (b) and (c) are correct. T buys a parcel of real estate for $100,000, which he finances by giving the seller a nonrecoursemortgage for the full purchase price. The debt is due in one balloon payment inYear 5. When the debt becomes due in Year 5, T decides to give the property back to theseller in satisfaction of the debt…In one month Aubrey earned $555 at her part-time job, and $88 was withheld for federal income tax. Suppose she earns $732 next month. How much will be withheld for federal income tax? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Marvin sells computer equipment and is objecting to an assessment received from SARS. During the current year of assessment (28 February), Marvin donated second-hand office equipment to a local radio station. In return, the radio station agreed to broadcast 'specials' that Marvin had on certain computer products for the week. SARS taxed the value of the office equipment donated to the radio station and stated that the donation fell within the definition of gross income. Marvin believes otherwise. YOU ARE REQUIRED: Discuss all the gross income requirements that Marvin should bear in mind when preparing the objection of the assessment. (Assume that Marvin is a resident of the Republic.)