2- The marginal cost for year t is computed as SV, - SV-1+SV¢ • i+ Cost, where SVdenotes salvage value.a) TRUEb) FALSE3- Replacement rule implies replacing the existing asset when the marginal cost of theexisting asset is more than the marginal cost of the new asset.a) TRUEb) FALSE4- Depreciation recapture occurs when the market value of an asset is greater than thebook value.a) TRUEb) FALSE5-Year1SVO&M15,000 100012,000 15009.000232000The table above lists salve value (SV) and operating and mainteriance (O&M) cost of an assetthrough 3 years with the initial cost of $20,000. Given MARR is 10%, which of the statementsis correct (choose the closest answer)?a) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is$6,500b) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is$7,048c) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is$7,048d) The marginal cost at year 2 is S6,500 and the annual cost (EUAC) through year two is$6.000

Marginal cost signifies the supplementary cost accrued in manufacturing an additional unit of a…

2- The marginal cost for yeart is computed as SV, -SV-1 +SV,i+Cost, where SV denotes salvage value. a) TRUE b) FALSE 3- Replacement rule implies replacing the existing asset when the marginal cost of the existing asset is more than the marginal cost of the new asset. a) TRUE b) FALSE 4- Depreciation recapture occurs when the market value of an asset is greater than the book value. a) TRUE b) FALSE 5- Year 1 2 3 I SV O&M 15,000 1000 12,000 1500 9.000 2000 The table above lists salve value (SV) and operating and maintenance (O&M) cost of an asset through 3 years with the initial cost of $20,000. Given MARR is 10%, which of the statements is correct (choose the closest answer)? a) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is $6,500 b) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is $7,048 c) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is $7,048 d) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is $6,000

2- The marginal cost for yeart is computed as SV, -SV-1 +SV,i+Cost, where SV denotes salvage value. a) TRUE b) FALSE 3- Replacement rule implies replacing the existing asset when the marginal cost of the existing asset is more than the marginal cost of the new asset. a) TRUE b) FALSE 4- Depreciation recapture occurs when the market value of an asset is greater than the book value. a) TRUE b) FALSE 5- Year 1 2 3 I SV O&M 15,000 1000 12,000 1500 9.000 2000 The table above lists salve value (SV) and operating and maintenance (O&M) cost of an asset through 3 years with the initial cost of $20,000. Given MARR is 10%, which of the statements is correct (choose the closest answer)? a) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is $6,500 b) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is $7,048 c) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is $7,048 d) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is $6,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The cost of a depreciable asset is equal to: a. purchase cost + costs attributable to put the asset for use b. current market price of the asset c. only purchase cost of the asset d. purchase cost + estimated salvage or residual value
A project capitalized for P 2,850,000 invested in depreciable asset will earn a uniform annual revenue of P 1,650,000 for 10 years. The costs for operation and maintenance total P 725,000 a year, and taxes and insurance will cost 3% of the first cost each year. The company expects its capital to earn 14% before income taxes. *** Type the letter of the correct answer. Using ROR method 1. The depreciation cost is: a) P 546,383.59 2. The total annual cost is: a) P 957,883.59 3. The rate of return is: • Using AW method 5. The annual revenue is: a) 44.92% 4. Is this a desirable investment? a) NO b) YES a) P 1,750,000 6. The total annual cost is: a) P 1,755,883.59 7. Annual worth is: b) P 147,383.59 a) P 293,116.41 8. Would you recommend a) NO b) P 1,356,883.59 b) 38.85% b) P 3,240,000 b) P 1,543,606.94 b) - P 105,883.59 investing? b) YES c) P 285,000.00 c) P 1,144,606.94 c) 24.28% c) MAYBE c) P 2,429,600 c) P 1,356,883.59 c) P 155,500.00 c) MAYBE d) P 334,106.94 d) P 1,095,500.00 d) 22.46%…
Updated class practice problem to include state tax and proper consideration of asset disposal (1/2 depreciation and need BV to determine recapture or loss) GIVENS: Initial Cost $150,000 Annual net saving $50,000 state Useful life 6 years federal 6.50% 21.0% Salvage value $30,000 tax rate BTCF-D TI tax rate BTCF-Income Tax Year Taxable BTCF MACRS Depreciation Income Income Tax ATCF 0 ($150,000) ($150,000) 1 50,000 20% ($30,000) $20,000 $4,618 45,382 2 50,000 32% ($48,000) $2,000 $462 49,538 3 50,000 19.20% ($28,800) $21,200 $4,895 45,105 4 50,000 11.52% ($17,280) $32,720 $7,555 42,445 5 50,000 11.52% ($17,280) $32,720 $7,555 42,445 6 50,000 2.88% ($4,320) $45,680 $10,548 63,523 indudes 6 and disposal disposal 30,000 BV= $4,320 $25,680 $5,930 recapture ROR Question 1 What is the ATCF ROR when state taxes and asset disposal are properly considered?
10.
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $4,600,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,100,000 and that variable costs should be $205 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $475,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $308 per ton. The engineering department estimates you will need an initial net working capital investment of $440,000. You require a return of 12 percent and face a tax rate of 23 percent on this project. a. Suppose you’re confident about your own projections, but you’re a little unsure about Detroit’s actual machine screw…
Updated class practice problem to include state tax and proper consideration of asset disposal (1/2 depreciation and need BV to determine recapture or loss) GIVENS: Initial Cost $150,000 Annual net saving $50,000 state Useful life Salvage value $30,000 6 years federal 6.50% 21.0% tax rate -BTCF-D TI tax rate BTCF-Income Tax Year Taxable Income BTCF MACRS Depreciation ATCF Income Tax 0 ($150,000) ($150,000) 1 50,000 20% ($30,000) $20,000 $4,618 45,382 2 50,000 32% ($48,000) $2,000 $462 49,538 3456 50,000 19.20% ($28,800) $21,200 $4,895 45,105 4 50,000 11.52% ($17,280) $32,720 $7,555 42,445 50,000 11.52% ($17,280) $32,720 $7,555 42,445 50,000 2.88% disposal 30,000 BV= ($4,320) $4,320 $45,680 $25,680 $5,930 $10,548 63,523 includes 6 and disposal recapture ROR Question 1 What is the ATCF ROR when state taxes and asset disposal are properly considered?
14.
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A furniture company buys a forest to obtain wood for manufacturing furniture. The related costs to theforest are:Cost of buying the forest = $730,000,000Wood expected to be extracted = 400,000 tonCost of restoration of the forest = $120,000,000Residual/salvage value = $233,000,000Trees cut in year 1 = 107,000 tonsTrees cut in year 2 = 89,000 tonsCompute the depletion rate and depletion charge for the first 2 years.
Ella Ltd recently started to manufacture and sell productDG. The variable cost of product DG is £4 per unit and the totalweekly fixed costs are £18 000.The company has set the initial selling price of product DG byadding a mark up of 40 per cent to its total unit cost. It has assumedthat production and sales will be 3000 units per week.The company holds no stocks of product DG.Required:(a) Calculate for product DG:(i) the initial selling price per unit; and(ii) the resultant weekly profit. The management accountant has established that alinear relationship between the unit selling price (P in £)and the weekly demand (Q in units) for product DG isgiven by:P = 20 - 0:002QThe marginal revenue (MR in £ per unit) is related to weeklydemand (Q in units) by the equation:MR = 20 - 0:004Q(b) Calculate the selling price per unit for product DG that shouldbe set in order to maximize weekly profit. (c) Distinguish briefly between penetration and skimming pricingpolicies when launching a new…
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