MNH firm revealed a large coal mine expected to mine 254 tons of coal. The firm invests $10264 for mining the coal. They are effective in extracting 50 tons of the coal in the first year. Then the depletion cost is: O 5051.18 O 4040.94 O 2020.47 O 3030.71 O 1010.24
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- ABC Company is considering investing in new production equipment at a cost of $60,000 with a 10-year useful life and no salvage value. The following are estimated for Year 1 of the project: Sales = $100,000 Production costs = $82,600 Depreciation expense = $6,000 Calculate the following for ABC Company for Year 1: Operating income = $ Average investment = $ Accounting rate of return = %Calculating EAC You are evaluating two different silicon wafer milling machines. The Techron I costs $265,000, has a 3-year life, and has pretax operating costs of $41,000 per year. The Techron II costs $330,000, has a 5-year life, and has pretax operating costs of $52,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $25,000. If your tax rate is 21 percent and your discount rate is 9 percent, compute the EAC for both machines. Which do you prefer? Why?ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $843,200.00 work cell. Further, it will cost the firm $51,700.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $59,100.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $5,200.00. Finally, the firm will invest $10,800.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $917,000.00 with expenses estimated at 38.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 40.00%. The work cell is estimated to have a market value of $489,000.00 at the end of the fourth year. The firm expects to reclaim 85.00% of the…
- CC1 company is considering an investment (at time = 0) in a machine that produces arrows. The cost of the machine is 42205 dollars with zero expected salvage value. Annual production in units during the 3-year life of the machine is expected to be (starting at time = 1) 4046 , 7950, and 10350. The arrows sale price per unit is 13 dollars in year one and it is expected to increase by 6% per year thereafter. Production costs per unit will be 5 dollars in year one, and then increase by 4% per year. Depreciation on the machine is fixed at 14204 dollars per year, and the overall tax rate is 40%. and the minimum acceptable rate of return is 10% percent. Calculate the net present value of this investment. Assume all flows are at the end of each year. round your answer to the nearest cent.Strip Mining Inc. can develop a new mine at an initial cost of $5 million. The mine will provide a cash flow of $30 million in year 1. The land then must be reclaimed at a cost of $28 million in the second year. At which of the following cost of capital's should the company develop the mine? A) 10% B)20% C)350% D)400%3. A food processing plant consumed 600,000 kWh of electric energy annually and pays an average of Php 1.00/kWh. A study is being made to generate its own power to supply the plant's energy requirement. The power plant installed would cost Php 1,500,000. Annual operation and maintenance, Php 350,000. Other expenses, Php 85,000 per year. Life of power plant is 15 years. The salvage value ate the end of life is Php 350,000. Annual taxes and insurance, 4% of the first cost. The rate of interest is 12%. Using the sinking fund method for depreciation, determine if the power plant is justifiable. Use Rate of Return (ROR) method and Annual Worth (AW) method. If the calculations predicted that the plant is a good investment, when will the payback period be?
- PQR Ltd. is considering an equipment of $1,680,000, has a life of six year, and depreciation is straight line to zero over the use life of the project. Salvage value of the equipment is zero at the end of the project. Data of sales, price per unit, variable cost per unit and fixed cost is provided in the table below. Sales in units Price per unit Variable Cost per unit Fixed Cost 88,500 $37.50 $20.35 $750,000 Sales units, price, variable cost and fixed cost are all accurate to within +5%. Calculate the net present value (NPV) under the worst case scenario, when the required rate of return is 12% and tax rate is 30%.A chemical plant worth P 110M has an estimated life of 6 years and a projected scrap value of P 10M. after 3 years of operation an explosion made it a total loss. How much money would have to be raised to put up a new plant costing P 150M, if depreciation reserved had been maintained during its 3 years of operation by SYD Method? Select one: a. P 82.4M b. P 78.6M c. P 100M d. P 92.8MFreeport McMoRan engineers estimated that the capital investment necessary for recovering valuable metals (nickel, silver, gold, etc.) from a copper refinery’s wastewater would be $150 million. The equipment is expected to have a useful life of 10 years with no salvage value. The amount of metal currently discharged in the wastewater is 12,500 pounds per year. The recovered metals are expected to have a selling price of $250 per pound. The efficiency relation of the recovery operation is represented by X 0.5, where X represents the efficiency in percentage. What value of X is necessary for the company to break even? Assume i = 10% per year.
- Lesego Ltd is considering an investment in a new machine for the production of a new product, X. There are two possibilities, Machine A and Machine B. Both product X and the machine would have an expected life of five years.The following information is available:Product X Selling price $50Variable cost 32Increase in fixed overhead (excluding depreciation of the new machine) is $90,000 per year.YearSales units 1 10,0002 15,0003 20,0004 20,0005 5,000 Machine A Machine BInitial cost ($000) 550 480Residual value 50 30The company’s cost of capital is 10%,Required:Evaluate each machine, using the following methods:Accounting rate of return Payback;Net present value. Discuss the importance of capital budgeting in organisations.We assume that the company you selected is considering a new project. The project has 8 years’ life. This project requires initial investment of $235 million to purchase the building, and purchase equipment, and $15 million for shipping & installation fee. The fixed assets (Total of 235+15= $250 M) fall in the 7-year MACRS class. The salvage value of fixed assets is $38 million. The number of units of the new product expected to be sold in the first year is 900,000 and expected to grow at annual growth rate of 9%. The sales price is $265 per unit and the variable cost is $174 per unit in the first year, but they should be adjusted accordingly based on the estimated annualized inflation rate of 2.8%. Therequired net operating working capital (NOWC) for each year is 15% of sales for that year. The company is in the 21% tax bracket. The company’s optimal capital structure is 65% equity and 35 debt financing. Assume a WACC of 7 % based on target capital structure of this firm. (This…A coal fired Power plant with 30,000 kw rated capacity costs P 15,000 per kw installed. Annual operating cost, P 12 million; annual maintenance cost, P 8 million; annual depreciation, P 15 million; interest on investment per year, 8%; cost of coal, P 800 per ton. If one pound of coal is needed to generate 1 kwh, find the total annual cost to operate the plant assuming plant capacity factor of 50%.
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