Home Properties is developing a subdivision that includes 320 home lots. The 150 lots in the Canyon section are below a ridge and donot have views of the neighboring canyons and hills; the 170 lots in the Hilltop section offer unobstructed views. The expected sellingprice for each Canyon lot is $42,000 and for each Hilltop lot is $105,000. The developer acquired the land for $2,100,000 and spentanother $3,000,000 on street and utilities improvements.Assign the joint land and improvement costs of $5,100,000 to the Canyon section and the Hilltop section using the value basis ofallocation. (Do not round your intermediate calculations.)Canyon sectionHilltop sectionTotalsSales ValueNumeratorPercent of Sales ValueDenominator% of SalesValue000Cost to Allocate Allocated CostQuantityof Lots

The major goal of cost allocation is to increase cost information clarity and accuracy, allowing…

Answered: subdivision that includes 320 home…

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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Home Properties is developing a subdivision that includes 340 home lots. The 200 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 140 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $47,000 and for each Hilltop lot is $96,000. The developer acquired the land for $1.700,000 and spent another $2,700,000 on street and utilities improvements. Assign the joint land and improvement costs of $4,400,000 to the Canyon section and the Hilltop section using the value basis of allocation. (Do not round your intermediate calculations.) Canyon section Hilltop section Totals Sales Value Numerator Percent of Sales Value Denominator % of Sales Value 0 0 0 Cost to Allocate Allocated Cost Quantity of Lots
The Blowing Rock Partnership purchased land for $1,200,000 with plans to build a spa on the site. The partnership tore down several buildings on the property for $20,000. Salvaged materials with a cost of $6,000 will be repurposed in the spa. Trees were removed for $5,000 and drainage was added for $30,000. The area was fenced for $41,000. A preliminary consultation with an architect cost $2,500 and legal fees of $3,200 were paid in connection with changing the zoning of the property. What accounts will be debited for these costs? O Land, $1,249,000; Land Improvements, $41,000; Building, $5,700 O Land, $1,235,000; Land Improvements, $55,000; Architect Expense, $2,500,000; Legal Expense, $3,200 Land, $1,255,000; Land Improvements, $41,000; Building, $11,700 O Land, $1,249,000; Land Improvements, $41,000; Building, $2,500; Legal Expense, $3,200
MIRR unequal lives. Grady Enterprises is looking at two project opportunities for a parcel of land the company currently owns. The first project is a restaurant, and the second project is a sports facility. The projected cash flow of the restaurant is an initial cost of $1,470,000 with cash flows over the next six years of $240,000 (year one). $280,000 (year two), $280,000 (years three through five), and $1,700,000 (year six), at which point Grady plans to sell the restaurant. The sports facility has the following cash flows: an initial cost of $2,450,000 with cash flows over the next four years of $360,000 (years one through three) and $3,120,000 (year four), at which point Grady plans to sell the facility. The appropriate discount rate for the restaurant is 9.5% and the appropriate discount rate for the sports facility is 11.5%. What are the MIRRS for the Grady Enterprises projects? What are the MIRRS when you adjust for the unequal lives? Do the MIRR adjusted for unequal lives…
NPV unequal lives. Grady Enterprises is looking at two project opportunities for a parcel of land the company cumenty owns. The first project is a restaurant, and the second project is a sports facility. The projected cash flow of the restaurant is an initial cost of $1,430,000 with cash flows over the next six years of $170,000 (year one), $200,000 (year two), $330,000 (years three through five), and $1,720,000 (year six), at which point Grady plans to sell the restaurant. The sports facility has the following cash flows: an initial cost of $2.330,000 with cash flows over the next four years of $420,000 years one through three) and $3,480,000 (year four), at which point Grady plans to sell the facility. If the appropriate discount rate for the restaurant is 10.0% and the appropriate discount rate for the sports facility is 11.5%, use the NPV to determine which project Grady should choose for the parcel of land. Adjust the NPV for unequal lives with the equivalent annual annuity. Does…
Home Properties is developing a subdivision that includes 470 home lots. The 170 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 300 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $51,000 and for each Hilltop lot is $98,000. The developer acquired the land for $2,400,000 and spent another $2,000,000 on street and utilities improvements. Assign the joint land and improvement costs of $4,400,000 to the Canyon section and the Hilltop section using the value basis of allocation. Note: Do not round your intermediate calculations. Canyon section Hilltop section Totals Sales Value Numerator Percent of Sales Value Denominator % of Sales Value Cost to Allocato Allocated Cost
NPV and IRR, Mutually Exclusive Projects For discount factors use Exhibit 12B-1 and Exhibit 12B-2. Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is $3,600,000, and it has a net annual after-tax cash inflow of $900,000. The CAM Y model is more expensive, selling for $4,200,000, but it will produce a net annual after-tax cash inflow of $1,050,000. The cost of capital for the company is 10%. Required: 1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar. CAM X: $fill in the blank 1 CAM Y: $fill in the blank 2 Which model would you recommend using NPV?CAM Y 2. Select the IRR for each project. CAM X: 20% - 25% CAM Y: 20% - 25% Which model would you recommend using IRR?Both
A community public works project will cost $92,000 and will benefit five different individuals. Individual Individual Benefit ($) Individual Cost ($) 1 4,500 6,000 2 18,500 15,000 3 19,000 17,000 4 30,000 24,000 5 29,000 30,000 Is this project economically feasible? Please show work in an Excel spreadsheet that lists the benefit for each individual. Would this project be approved by a majority at a community referendum?
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V3. A school district considers two alternative plans for an athletic stadium. An engineer makes the following cost estimates for each: Concrete Bleachers. First cost, $350,000. Life is 90 years. Annual maintenance cost $2,500. Wooden Bleachers on Earth Fill. First cost, $200,000. Life is 90 years. Painting cost $12,000 every 10 years. New seats costs $40,000 every 15 years and new bleachers cost $100,000 every 30 years (don’t include replacing the bleachers in year 90). Compare equivalent uniform annual costs for a 90-year period using i = 7% compounded annually. (Which one would you choose?)
NPV unequal lives. Grady Enterprises is looking at two project opportunities for a parcel of land the company currently owns. The first project is a restaurant, and the second project is a sports facility. The projected cash flow of the restaurant is an initial cost of $1,500,000 with cash flows over the next six years of $200,000 (year one), $250,000 (year two), $300,000 (years three through five), and $1,750,000 (year six), at which point Grady plans to sell the restaurant. The sports facility has the following cash flows: an initial cost of $2,400,000 with cash flows over the next four years of $400,000 (years one through three) and $3,000,000 (year four), at which point Grady plans to sell the facility. If the appropriate discount rate for the restaurant is 11.0% and the appropriate discount rate for the sports facility is 13.0%, If the appropriate discount rate for the restaurant is 13.0%, what is the NPV of the restaurant project?
NPV unequal lives. Grady Enterprises is looking at two project opportunities for a parcel of land the company currently owns. The first project is a restaurant, and the second project is a sports facility. The projected cash flow of the restaurant is an initial cost of $1,470,000 with cash flows over the next six years of $170,000 (year one), $200,000 (year two), $350,000 (years three through five), and $1,760,000 (year six), at which point Grady plans to sell the restaurant. The sports facility has the following cash flows: an initial cost of $2,410,000 with cash flows over the next four years of $380,000 (years one through three) and $3,240,000 (year four), at which point Grady plans to sell the facility. If the appropriate discount rate for the restaurant is 9.5% and the appropriate discount rate for the sports facility is 13.0%, If the appropriate discount rate for the sports facility is 13.0%, what is the NPV of the sports facility?

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