Do fast answer of this accounting questions Kelly's Corner Bakery purchased a lot in Oil City five yearsago at a cost of $600,000. Today, that lot has a market valueof $725,000. At the time of the purchase, the company spent$55,000 to level the lot and another $4,800 to install stormdrains. The company now wants to build a new facility onthat site. The building cost is estimated at $1,075,000. Whatamount should be used as the initial cash flow for thisproject?

Initial Cash Flow Calculation :1. Market value of the lot: Since the lot has a market value of…

Answered: Kelly's Corner Bakery purchased a lot…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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Kelly's Corner Bakery purchased a lot in Oil City 6 years ago at a cost of $302,000. Today, that lot has a market value of $340,000. At the time of the purchase, the company spent $15,000 to level the lot and another $20,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.51 million. What amount should be used as the initial cash flow for this project?
Kelly’s Corner Bakery purchased a lot in Oil City 6 years ago at a cost of $302,000. Today, that lot has a book value of zero and market value of $340,000. At the time of the purchase, the company spent $15,000 to level the lot and another $20,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.51 million, and will be depreciated using the straight-line method to a $400,000 book value over the 6-year life of the project. The company is evaluates this new facility will increase annual sales by $1.2 million and annual cash costs by $0.5 million. Based on past information, the company believes that it can sell the facility for $800,000 when they are done with it in 6 years. The applicable tax rate is 32 percent. What is the net present value of the project if the required rate of return is 10 percent?
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Give typing answer with explanation and conclusion
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Jayco, Inc. would like to set up a new plant. Currently, Jayco has the opportunity to buy an existing building at a cost of $240,000. The building falls into a MACRS 39-year class, with depreciation rates of 1.3% in Year 1, 2.6% in each of Years 2-39, and 1.3% in Year 40. Necessary equipment for the plant will cost $150,000, including installation costs. The equipment falls into a MACRS 5-year class. Depreciation rates for this class are 20%, 32%, 19%, 12%, 11%, and 6%. The project would also require an initial investment of $50,000 in net working capital. The initial working capital investment would also be made at the beginning of the project’s life, that is, in Year 0. The project's estimated economic life is four years. At the end of that time, the building is expected to have a market value of $100,000, whereas the equipment would have a market value of $20,000. The production department has estimated that variable manufacturing costs would total 60% of sales and that fixed…
A firm is considering replacing a machinethat has been used to make a certain kind of packaging material. The new, improved machine willcost $31,000 installed and will have an estimatedeconomic life of 10 years with a salvage value of$2,500. Operating costs are expected to be $1,000per year throughout the service life of the machine.The old machine (still in use) had an original cost of$25,000 four years ago, and at the time it was purchased, its service life (physical life) was estimatedto be seven years with a salvage value of $5,000. Theold machine has a current market value of $7,700. Ifthe firm retains the old machine, its updated marketvalues and operating costs for the next four years willbe as given in Table P14.8.The firm’s MARR is 12%.(a) Working with the updated estimates of marketvalues and operating costs over the next fouryears, determine the remaining useful life of theold machine.(b) Determine whether it is economical to make thereplacement now.(c) If the firm’s…
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An entrepreneurial civil engineer who owns his own design/build company purchased a small crane 2 years ago at a cost of $71,000. At that time, it was expected to be used for 10 years and then traded in for its salvage value of $10,000. Due to increased construction activities, the company would prefer to trade for a new, larger crane now which will cost $93,000. The company estimates that the old crane can be used, if necessary, for another 4 years, at which time it will have a $25,000 estimated market value. Its current market value is estimated to be $39,000, and if it is used for another 4 years, it will have M&O costs of $17,000 per year. Determine the values of P, n, S, and AOC that should be used for the existing crane in a replacement analysis performed today.

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