Upper Division of Lower Company acquired an asset with a cost of $580,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows.   Year Cash Flow 1 $ 210,000   2   250,000   3   285,000   4   320,000       The cost of the asset is expected to increase at a rate of 20 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes.   Required: a. What is the ROI for each year of the asset's life, using a historical cost approach? b. What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year?

2. If an asset costs $70,950 and is expected to have a salvage value of $949 at the end of five year life, and generates annual cash net cash inflows of $4,447 each year, the cash payback period rounding to two decimal places is

Five Star is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $149,600 of 5% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data have been assembled: Cost of equipment Life of equipment Estimated residual value of equipment Yearly costs to operate the warehouse, excluding depreciation of equipment Yearly expected revenues-years 1-8 Yearly expected revenues-years 9-16 Required: Differential revenue from alternatives: Revenue from operating warehouse Revenue from investment in bonds Differential revenue from operating warehouse 1. Prepare a differential analysis report of the proposed operation of the warehouse for the 16 years as compared with present conditions. Five Star Proposal to Operate Warehouse. Differential cost of alternatives: Costs to operate warehouse ✓ $149,600 16 years $27,500 Cost of equipment less residual…

A company enters into a project that will be unwound at the end of year 5, and it is expected that roughly 15% of the sales related to this project will be “on account” where the payments are made a year later, and where at the end of the project, all payments are received at EOY 5 (i.e. not received one year later). Show what the “Working Capital” investments are related to each period, based on these sales and how it was calculated: