Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas's contract specifies that it will receive a flat fee of $56,000 and an additional $26,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 20% chance that Bran will achieve the cost-savings target.

Tullis Construction enters into a long-term fixed price contract to build an office tower for $10,600,000. In the first year of the contract Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete the project are $5,000,000. Tullis billed $5,000,000 in year 1 and collected $3,100,000 by the end of the end of the year. How should Tullis report Construction in Progress and Billings on Construction in Progress at the end of year 1 on the balance sheet assuming the use of the completed - contract method? O A. asset of $2,000,000 O B. liability of $1,900,000 O C. asset of $1,900,000 O D. liability of $2,000,000

Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 2345 2 3 5 72,300 77,700 82,600 80,600 66,700 Production of the implants will require $1,410,000 in net working capital to start and additional net working capital investments each year equal to 10 percent of the projected sales increase for the following year. Total fixed costs are $3,450,000 per year, variable production costs are $136 per unit, and the units are priced at $318 each. The equipment needed to begin production has an installed cost of $17,800,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 15 percent of its acquisition cost. The tax rate is 21 percent and the required return is 15 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations…

Precision Dyes wants to supply 100,000 bottles of a specialized industrial color to its customer per year, who wants to pay $250 per bottle. The contract will last for 4 years. It will cost Precision $6 million to install the necessary equipment to start production. The equipment can be depreciated using the 5-year MACRS method (20%, 32%, 19.20%, 11.52%, 11.52%, 5.76%). Precision estimates that in four years, this equipment can be salvaged for $200,000. The fixed production costs will be $4 million per year, and the variable production costs should be $150 per bottle. Precision also needs an initial investment in net working capital of $600,000, all of which will be recovered when the project ends. The tax rate is 22 percent and Precision requires a return of 12 percent. Should Precision go forward with this deal? Why? Explain

1. Celebrity Food is evaluating the kale crisper project. During year 1, the kale crisper project is expected to have relevant revenue of $400,000, relevant variable costs of $125,000, and relevant depreciation of $40,000. In addition, Celebrity Food would have one source of fixed costs associated with the kale crisper project. Celebrity Food just signed a deal with Lights Camera Action to develop an advertising campaign for use in the project. The terms of the deal require Celebrity Food to pay Lights Camera Action either $80,000 in 1 year if the project is pursued or $110,000 in 1 year if the project is not pursued. Relevant net income for the kale crisper project in year 1 is expected to be $200,000.calculate is the tax rate expected to be in year 1? Answer in decimal format, rounded to the nearest hundredth of a percent (for example, 1.23% would be entered as 0.0123).   2. What is the net present value of the flier project, which is a 3-year project where Dispersion would spread…

ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $843,200.00 work cell. Further, it will cost the firm $51,700.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $59,100.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $5,200.00. Finally, the firm will invest $10,800.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $917,000.00 with expenses estimated at 38.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 40.00%. The work cell is estimated to have a market value of $489,000.00 at the end of the fourth year. The firm expects to reclaim 85.00% of the…

Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 74,400 2345 79,800 85,400 82,700 69,500 Production of the implants will require $1,480,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $3,800,000 per year, variable production costs are $143 per unit, and the units are priced at $325 each. The equipment needed to begin production has an installed cost of $18,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. The tax rate is 23 percent and the required return is 17 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations and…

SAP Inc. received a $1.5 million grant under its Small Business Innovation program. SAP invested the grant money and developed a system to remove metal contaminants from storm water in shipyards. The firm estimates that each shipyard spends $500,000 a year on storm water clean-up efforts. If SAP is able to sign up and retain four shipyards in the first year onwards, what is the present value (PV) of the project (net of investment) if the cost of capital for SAP is 14% per year? Assume a cost of operations and other costs for SAP equal 50% of revenue. $5.64 million $4.80 million $4.51 million $5.93 million

The Chief Operations Officer (COO) of a manufacturing firm recommends one of the manufacturing sites to undergo a process improvement initiative. He claims that this project will enable the company to realize a net savings of at least $3.25 Mln. The Chief Financial Officer (CFO) of the company tasked you to conduct a financial analysis to verify the claims of the COO. After performing cost analysis, you estimated that the project will require an initial investment of $2 Mln today and $1 Mln in Year 1. Afterwards, the initiative will yield an annual cost savings of $850k from Year 2 to Year 10. You assume that these cost savings are realized at the end of each year.    (a) Suppose that you use a discount rate of 5%. Will the resulting net savings support the claim of the COO? (b) Determine the Internal Rate of Return (IRR) of the process improvement initiative. (c) Show the NPV profile of the project.

Aria Acoustics, Incorporated (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year 1 2 3 4 5 Unit Sales 74, 000 87, 000 106, 250 98, 500 67, 800 Production of the implants will require $1,750,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $3,700,000 per year, variable production costs are $260 per unit, and the units are priced at $390 each. The equipment needed to begin production has an installed cost of $17,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. The tax rate is 25 percent and the required return is 17 percent. MACRS schedule a. What is the NPV of the project? Note: Do not round intermediate…