5 An Asian Airline jet costs $28 million and is expected to fly 200 million kilometres during its 10-year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 54 million kilometres in the first year, how much depreciation should Asian Airline record under the units-of-production method? a $2.8 million b $7.56 million c $5.6 million d cannot be determined from the data given

5 An Asian Airline jet costs $28 million and is expected to fly 200 million kilometres during its 10-year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 54 million kilometres in the first year, how much depreciation should Asian Airline record under the units-of-production method? a $2.8 million b $7.56 million c $5.6 million d cannot be determined from the data given

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2 You have been asked to evaluate the proposed purchase of a new machine by your company. The price of the new machine is £250,000, and it will cost an additional £25,000 to adapt it to the company’s purpose. The company might try to sell the machine after five years, but it is very unlikely to get a meaningful (material) price. Depreciation is based on the straight-line method. Use of the machine would require an increase in net working capital of £15,000, which would be recovered in the final year of the investment. The machine is expected to save the firm £50,000 per year in operating costs. The corporate tax rate is 40%. Required: a. What is the initial investment outlay associated with the machine purchase? b. What is the terminal cash flow in year five? c. Critically examine the treatment of working capital in the above case. d. If the project’s required rate of return is 15%, should the equipment be purchased? e. Undertake a detailed critical evaluation of how your company could…
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8 Netflix is considering building a new production facility in New Jersey. Netflix's financial team has made the following estimates regarding the costs and benefits of the new production facility in 2023: Sales: 918 Variable Costs: 216 EBIT: 414 Tax Rate: 25% Depreciation: 16 Change in NWC: 61 CapEx: 9 Based on the above information what is the 2023 FCF from this project?
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16. A car costs P800,000, 4 years ago, and the salvage value is P50,000, 6 years from now. If it is to be replaced by a new one and the trade-in value is #450,000, find the sunk cost if money is worth 12% O
S7.33 Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table. He is told to assume that: a) the life of each machine is 3 years, and b) the company thinks it knows how to make 12% on investments no more risky than this one. Machine A Machine B Original cost Labor per year Maintenance per year Salvage value $10,000 2,000 $20,000 4,000 1,000 7,000 4,000 2,000 Determine, via the present value method, which machine Tim ce should recommend.
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13,000 6. The Imperial Chemical Company is considering purchasing a chemical analysis machine worth $13,000. Although the purchase of this machine will not produce any increase in sales revenues, it will result in a reduction of labour costs. In order to operate the machine properly, it must be calibrated each year. The machine has an expected life of 6 years, after which it will have no salvage value. The following table summarizes the annual savings in labour cost and the annual maintenance costs in calibration over 6 years: Year (n) Net Cash Flow ($) 0 Costs ($) Savings ($) -13,000 1 2,300 6,000 3,700 2 2,300 7,000 4,700 3 2,300 9,000 6,700 4 2,300 9,000 6,700 5 2,300 9,000 6,700 6 2,300 9,000 6,700 Find the internal rate of return for this project. [6]