Question 12Lichen Plc owns a machine that has a carrying value amount of £85,000 at the year-endof 31 March 2023. Its market value is £78,000 and costs of disposal are estimated at£2,500. A new machine would cost £150,000. Lichen Plc expects it to produce net cashflows of £30,000 per annum for the next three years. The cost of capital of Lichen Plc is8%.Required:What is the impairment loss on the machine to be recognised in the financial statementsat 31 March 2023 (Enter your answer to the nearest whole £).

The objective of the question is to calculate the impairment loss on the machine to be recognised in…

Answered: Question 12 Lichen Plc owns a machine…

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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Question 2 Auckland Co had £3,000,000 of capitalised development expenditure at cost brought forward at 1st October 2020 in respect of products currently in production and a new project began on the same date. The research stage of the new project lasted until 31st December 2020 and incurred £500,000 of costs. From that date the project incurred development costs of £200,000 per month. On 1st June 2021 the directors of Auckland Co become confident that the project would be successful and yield a profit well in excess of costs. The project will still be in development at 30th September 2021. Capitalised development expenditure is amortised at 10% per annum using the diminishing balance method. What amount will be charged to profit or loss for the year ended 30th September 2021 in respect of research and development costs? £1,800,000 £1,900,000 £1,500,000 O £1,300,000
QUESTION 10 A project will produce operating cash flows of $57,000 a year for 3 years. During the life of the project, inventory will be lowered by $10,000 and accounts receivable will increase by $20,000. Accounts payable will decrease by $5,000. The project requires the purchase of equipment at an initial cost of $90,000. The equipment will be salvaged at the end of the project creating a $17,000 after-tax cash inflow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 12%? $48,772.08 $54,681.35 $56,209.19 $42,908.17 $44,141.41
7. Assume a company is going to make an investment of $300,000 in a machine and the following are the cash flows that two different products would bring in years one through four. The company's required rate of return is 12%. Option A Option B Product A Product B $190,000 $150,000 190,000 180,000 60,000 60,000 20,000 70,000 Using the appropriate EXCEL spreadsheet in the Chapter11 NPV IRR Analysis.xlsx Download Chapter11 NPV IRR Analysis.xlsx, answer the following questions: What is the NPV for Option A? What is the NPV for Option B? What is the IRR for Option A? What is the IRR for Option B? PLEASE NOTE #1: The dollar amounts will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67). Round your IRR answers, in percentage format, to two decimal places (i.e. 12.34%). Given the above answers, which project should the…
QUESTION 34 Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%: FV of $1 FVOA PV of $1 PVOA 2.59374 15.93742 0.38554 6.14457 Required: Compute the net present value of the investment $0 $750,000 $(213,857.50) $1,000,000
9 Machines A and B are mutually exclusive and are expected to produce the following real cash flows: Cash Flows ($ thousands) Machine Co G C C A -100 +110 +121 eBook B -120 +110 +121 +133 eferences The real opportunity cost of capital is 10%. a. Calculate the NPV of each machine. b. Calculate the equivalent annual cash flow from each machine. c. Which machine should you buy? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the NPV of each machine. Note: Enter your answers in dollars not in thousands. Round your answers to the nearest whole dollar amount. Machine NPV A $ 100 B S 180 Required R
15. Present values and opportunity cost of capital (S2.1) Halcyon Lines is considering the purchase of a new bulk carrier for $8 million. The forecasted revenues are $5 million a year and operating costs are $4 million. A major refit costing $2 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $1.5 million. a. What is the NPV if the opportunity cost of capital is 8%? b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of 4.5%. How does this borrowing opportunity affect your calculation of NPV?
n * A manufacturer of video games develops a new game over two years. This costs $840,000 per year with one payment made immediately and the other at the end of two years. When the game is released, it is expected to make $1.50 million per year for three years after that. What is the net present value (NPV) of this decision if the cost of capital is 8%? OA $2,806,405 OB. $3,332.606 OC. $1,929,404 OD. $1,754,003
ANSWER PART C PLEASE Mett Co. is planning to develop a new product. A year after the launch of the product, itcan generate additional cash flows for the company of either £250,000, £110,000,£90,000 or £50,000, with all four scenarios equally likely. The project requires an initialinvestment of £90,000. The company’s beta is 0.65, its cost of capital is 6%, and the riskfree rate is 3%. Assume perfect capital markets. a) What is the Net Present Value (NPV) of the project? b) Suppose that the project is sold to investors as an all-equity firm to raise funds forthe initial investment. The cash flows of the project will be distributed to equityholders in one year. How much money can be raised in this way – that is, what isthe initial market value of the unlevered equity? Explain your answer c) Suppose the initial £90,000 is raised by borrowing at the risk-free interest rateinstead of issuing equity. What are the cash flows to equity and debt holders, andwhat is the initial value of the…
Giggins Limited is planning to expand its business. The expansion will cost £350,000 initially to purchase new premises and a further £150,000 to purchase equipment. Net cash inflows from the next seven years ofthe project are as follows:Year Net cash inflows1 60,0002 80,0003 130,0004 150,0005 175,0006 250,0007 275,000In which year would Giggins' investment be fully recovered?
14 NuPress Valet has a proposed investment with an initial cost of $62 million and cash flows of $12.5 million for 5 years. Debt represents 44 percent of the capital structure. The cost of equity is 13.7 percent, the pretax cost of debt is 8.5 percent, and the tax rate is 34 percent. What is the company's WACC?
Panthers plc is considering a project which will generate cash flows of £5,000 each year from years 3 to 7. The company has a cost of capital of 14%. What is the total present value of the cash flows? a) £21,440 b) £13,210 c) £17,090 d) £17,165
| All techniques Rieger International is evaluating the feasibility of investing $109,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: firm has a cost of capital of 11%. The a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for the proposed investment. Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (t) 1 GAW N 2 3 4 5 Print Cash inflows (CF₂) $35,000 $20,000 $30,000 $35,000 $40,000 Done X ces.)

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