During the next fiscal year ending June 30. 2020, Texas substantial investments in new product lines and in a modernization program. Significant changes to be made during the year are listed below: 1. Equipment with a net book value of P86,000 will be sold during the year. 2. All of the capital stock of Ohio Company will be exchanged with 5,000 shares of Texas Company at a time when the market value is P40 per share. P250,000 cash will also be given as part payment. 3. Bonds having a face value of P1,000,000 will be issued on June 30, 2020 at 98%. 4. Trading securities carried at market value of P200,000 will be sold for P215,000. nurchased during the year. 00 000 although there are

During the next fiscal year ending June 30. 2020, Texas substantial investments in new product lines and in a modernization program. Significant changes to be made during the year are listed below: 1. Equipment with a net book value of P86,000 will be sold during the year. 2. All of the capital stock of Ohio Company will be exchanged with 5,000 shares of Texas Company at a time when the market value is P40 per share. P250,000 cash will also be given as part payment. 3. Bonds having a face value of P1,000,000 will be issued on June 30, 2020 at 98%. 4. Trading securities carried at market value of P200,000 will be sold for P215,000. nurchased during the year. 00 000 although there are

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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The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Operating Net Cash Year Income Flow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The cash payback period for this investment a. 4 years Xb. 3 years c. 5 years d. 20 years
(c) Company X plans to purchase a methanol plant for $1 million. The plant is expected to generate $200,000 in total annual revenue at the end of its first year of operations, after which revenues are expected to grow by 2% per year as operations become more efficient. If the opportunity cost of capital in the market is 5%, determine: i. the net present value of this investment if the plant is expected to remain open forever. ii. if this company should purchase this plant. Give a reason for your answer
A retailer is looking to expand operations at all of their stores for an initial investment of $600. This investment will be depreciated on a straight line basis over the project's 8 year life. The expansion is expected to produce annual cash inflows of $610 in consecutive years over the life of the project beginning one year from today, while also producing annual cash outflows of $310 in consecutive years over the life of the project, also beginning one year from today. What is the project's NPV if the corporate tax rate is 38% and the project's required rate of return is 14%? $391.22 $1116.00 $1595.04 $1.56 $395.04
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 $18,750 18,750 18,750 18,750 18,750 The average rate of return for this investment 3 4 Operating Income 5 Net Cash Flow $93,750 93,750 93,750 93,750 93,750
On January 1, 2023, Marigold Inc. signed a fixed-price contract to have Builder Associates construct a major head office facility a a cost of $4 million. It was estimated that it would take three years to complete the project. Also, on January 1, 2023, to finance the construction cost, Marigold borrowed $4 million that is repayable in 10 annual instalments of $400,000, plus interest at the rate of 10%. During 2023, Marigold made deposit and progress payments totalling $1.5 million under the contract; the weighted average amount of accumulated expenditures was $791,000 for the year. The excess amount of borrowed funds was invested in short-term securities, from which Marigold realized investment income of $24,300. For situation 1, what amount should Marigold report as capitalized borrowing costs at December 31, 2023? (If an answer is zero, please enter O. Do not leave any fields blank.) Capitalized borrowing $ 375700
Company A is preparing a deal to acquire company B. One analyst estimated that the merger would produce 85 million dollars of annual cost savings, from operations, general and administrative expenses and marketing. These annual cost savings are expected to begin two years from now, and grow at 2.5% a year. In addition the analyst is assuming an after-tax integration cost of 0.1 billion, and taxes of 20%. Assume that the integration cost of 0.1 billion happens one year after the merger is completed (year 1). The analyst is using a cost of capital of 10% to value the synergies. Company B’s equity is trading at 2.3 B dollars (market value of equity). Company A is planning to pay a 32% premium for company B. a) Compute the value of the synergy as estimated by the analyst. b) does the estimate of synergies justify the premium? Could you show me how to work this out in an excel sheet?
Daisy's Creamery Inc. is considering one of two investment options. Option 1 is a $75,000 investment in new blending equipment that is expected to produce equal annual cash flows of $19,000 for each of seven years. Option 2 is a $90,000 investment in a new computer system that is expected to produce equal annual cash flows of $27,000 for each of five years. The residual value of the blending equipment at the end of the fifth year is estimated to be $15,000. The computer system has no expected residual value at the end of the fifth year. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0.327 0.233 0.404 0.592 0.424 0.361 0.194 0.284 10 0.558 0.386 0.322 0.247 0.162
A retailer is looking to expand operations at all of their stores for an initial investment of $760. This investment will be depreciated on a straight line basis over the project's 8 year life. The expansion is expected to produce annual cash inflows of $570 in consecutive years over the life of the project beginning one year from today, while also producing annual cash outflows of $310 in consecutive years over the life of the project, also beginning one year from today. What is the project's NPV if the corporate tax rate is 36% and the project's required rate of return is 9%? Place your answer in dollars and cents without the use of a dollar sign or a comma. If applicable, negative values should be entered with a minus sign in front of the number. Work all analysis out using at least 4 decimal places of accuracy.
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Example: A corporation is contemplating the purchase of some specialized machinery. The machinery will cost $250,000 and will be depreciated over its five year life by using the straight line method. Annual inflows of $300,000 and cash operating expenses of $220,000 are anticipated as a result of this new machinery. The corporation is subject to a 40 percent income tax rate. The payback period on this investment (rounded to the nearest tenth) is:
DEF Corporation is considering a business opportunity that would require an investment of P1,800,000 with an expected life of 10 years. Estimated annual cash inflows for 10 years, net of tax, amounts to P500,000. The salvage value is expected to be P700,000 at the end of the 1st year, P550,000 at the end of the 2nd year, P450,000 at the end of the 3rd year, P400,000 at the end of the 4th year, and will decrease by P50,000 every year starting the end of the fifth year. Compute the bailout period.