During the construction of a highway bypass, earth moving equipment costing P400,000 was purchased for use in transporting fill from the borrow pit. At the end of the 4-year project, the equipment will be sold for P200,000. The schedule for moving fill calls for a total of 100,000 cubic feet during the project. In the first year, 40% of the total fill is required; in the second year, 30%; in the third year 25%; and in the final year, the remaining 5%. Determine the service-output depreciation schedule.

During the construction of a highway bypass, earth moving equipment costing P400,000 was purchased for use in transporting fill from the borrow pit. At the end of the 4-year project, the equipment will be sold for P200,000. The schedule for moving fill calls for a total of 100,000 cubic feet during the project. In the first year, 40% of the total fill is required; in the second year, 30%; in the third year 25%; and in the final year, the remaining 5%. Determine the service-output depreciation schedule.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The Ocean City water park is considering the purchase of a new log flume ride. The cost to purchase the equipment is $8,000,000, and it will cost an additional $475,000 to have it installed. The equipment has an expected life of 6 years, and it will be depreciated using a MACRS 7-year class life. Management expects to run about 150 rides per day, with each ride averaging 35 riders. The season will last for 120 days per year. In the first year, the ticket price per rider is expected to be $5.25, and it will be increased by 4% per year. The variable cost per rider will be $1.65, and total fixed costs will be $525,000 per year. After six years, the ride will be dismantled at a cost of $245,000 and the parts will be sold for $600,000. The cost of capital is 8.5%, and its marginal tax rate is 25%. Using Goal Seek, calculate the minimum ticket price that must be charged in the first year in order to make the project acceptable.
The Drilling Corp. owns drilling rights on a tract of land on which crude oil has been discovered. The BBTD projects that the tract will allow drilling and recovery on crude for the next 4 years. They anticipate the following cost associated with the project including the cost of restoring the land to a park-like atmosphere. Below are projected data associated with this project: Annual cash receipts of $50,000 Annual cash expenses of $300,000 Equipment requirements of $500,000. Some of this equipment will be sold for $20,000 at the conclusion of the lease. The remainder of the equipment will have no salvage value at the end of the project and will be abandoned, adding to the rustic park-like atmosphere of the property. Inventory and supplies necessary to begin and maintain the project are $40,000 The cost of restoring the land to a pristine park-like setting and converting the drilling equipment into monkey bars is projected to be $100,000. ( Assume this is not a capital expenditure)…
A project requires an initial investment in equipment of $760,000 immediately (t=0) and is expected to produce sales revenue of $697, 000 the first year; this revenue will increase by 4.5% per year over the next four years. Manufacturing costs are estimated to be 67% of the sales. The project demand analysis, which was done last year, cost $235,000. The asset can be depreciated on a straight-line basis over five years to a zero salvage value. The corporate tax rate is 36%. The project requires an investment in working capital. Specifically, at the beginning of the project (t=0), $45,000 of working capital is required; thereafter, working capital is projected to be 6.0% of revenue. The investment in working capital will be recovered at the end of the fifth year. At the end of the 5th year, the company plans to sell the equipment for $18,900. To calculate the cost of capital for this project, the firm is going to use the following companies as comparable firms. Beta Debt Equity…
A proposed cost-saving device has an installed cost of $765,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes (MACRS schedule). The required initial net working capital investment is $67,000, the tax rate is 21 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $103,000. What level of pretax cost savings do we require for this project to be profitable? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Pretax cost savings
A machine’s first cost is $60,000 with salvage values over the next 5 years of are $50K, $40K, $32K, $25K, and $12K. The annual operating and maintenance costs are the same every year. Determine the machine total cost.
A proposed cost-saving device has an installed cost of $825,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes (MACRS schedule). The required initial net working capital investment is $91,000, the tax rate is 23 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $139,000. What level of pretax cost savings do we require for this project to be profitable? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Pretax cost savings
Project Y requires a $345,000 investment for new machinery with a six-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y $ 355,000 Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses 159,040 57,500 25,000 $ 113,460 Income Required: 1. Compute Project Y's annual net cash flows. Annual amounts Income Cash Flow Sales of new product 355,000 Expenses Materials, labor, and overhead (except depreciation) 159,040 Depreciation-Machinery 57,500 Selling, general, and administrative expenses 25,000 Income $ 113,460 Net cash flow 2$ %24
Cullumber Lumber, is considering purchasing a new wood saw that costs $40,000. The saw will generate revenues of $100,000 per year for five yearsThe cost of materials and labor needed to generate these revenues will total $60,000 per yearand other cash expenses will be $10,000 per year. The machine is expected to sell for $2.000 at the end of its fiveyear life and will be depreciated on a straight-line basis over five years to zeroCullumber's tax rate is 26 percentand its opportunity cost of capital is 14.20 percent. What is the project's NPV(Do not round intermediate calculationsRound final answer to decimal places, e.g. 5,275)
Briggs Excavation Company is planning an investment of $932,100 for a bulldozer. The bulldozer is expected to operate for 3,000 hours per year for eight years. Customers will be charged $140 per hour for bulldozer work. The bulldozer operator costs $32 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $30,000. The bulldozer uses fuel that is expected to cost $42 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows.…
Perit Industries has $125,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 125,000 $ 0 Working capital investment required $ 0 $ 125,000 Annual cash inflows $ 20,000 $ 64,000 Salvage value of equipment in six years $ 8,000 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 17%. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment…
Two techniques can be used to produce expansion anchors. Technique A costs $90,000 initially and will have a $12,000 salvage value after 3 years. The operating cost with this method will be $33,000 in year 1, increasing by $2600 each year. Technique B will have a first cost of $113,000, an operating cost of $7000 in year 1, increasing by $7000 each year,and a $43,000 salvage value after its 3-year life. At an interest rate of 13% per year, which technique should be used on the basis of a present worth analysis? Notice that there are no revenues. Please work out and do not use excel, however if you use excel please show how to input everything needed down to the formula, thank you!
An injection molding system has a first cost of $200,000 and an annual operating cost of $85,000 in years 1 and 2, increasing by $4,500 per year thereafter. The salvage value of the system is 25% of the first cost regardless of when the system is retired within its maximum useful life of 5 years. Using a MARR of 9% per year, determine the ESL and the respective AW value of the system. The ESL is year(s) and AW value of the system is $