CropExpected yield per acre without drainageYield boost 10%Expected price per acre:Additional revenue per acreAdditional revenueAverageAAcres tiledPrice per acre for tileTotal investmentTax rateCapital cost allowance (depreciation)Discount rateExpected yield boostYear4...01234567GRE22856456E50001112131415161718192123CornBProfitability Ratios22022511717,49014.1451501,500225,00015%25%6%10%UCC Beginnir CCA225,000196,875147,656110,74283,05762.29246.71935,04026.28019,71014.78211,0878.3156,2364,6773.5082,6311,9731.4801.110832624468CSoybeans351263198586169313,92028,12549,21936,91427,68620,76415.57311,6808,7606,5704.9273.6962,7722.0791,5591.169877658493370277208156117886649Ratio AnalysisDWheatE1051177411,025 150 acreUCC Ending196,875 half year rule147,656110,74283,05762.29246,71935,04026,28019,71014,78211,0878,3156,2364,6773,5082,6311,9731,4801.110.832624468351263198148FDepreciation Tax Saving4,219% of Sales Method7.3835,5374.1533,1152.3361,7521,31498573955441631223417513299745542312318C... +13107⠀4GHJInvestment Increase revenue After Tax Cashflow(225,000)14.14514.14514,14514.14514.14514,14514.14514.14514.14514.14514,14514,14514,14514,14514.14514.14514.14514.14514,14514.14514,14514,14514.14514.14514.145(187,031)19,40617,56016.17615,13814.35913,77513,33713,00912,76212.57812,43912.33512.25712.19912.15512,12212,09712,07912,06512.05412,04712.04112,03612,03312,031(9.522.41) NPVK▶ Understand the calculations in the spreadsheet "Tile Drainage". Which of thefollowing statement(s) is/are correct? Select all that apply.The tile drainage project will pay for itself in 10 years.The discount rate is 10%.Based on the current assumptions of 25 years useful life and 10 percent yieldincrease, Mr. Dietrich should not invest in the tile drainage project since the netpresent value (NPV) is negative.The net present value (NPV) will increase if the tile drainage could be effectivefor 50 years.

The spreadsheet does not indicate that the tile drainage project will pay for itself in 10 years.…

Understand the calculations in the spreadsheet "Tile Drainage". Which of the following statement(s) is/are correct? Select all that apply. The tile drainage project will pay for itself in 10 years. The discount rate is 10%. Based on the current assumptions of 25 years useful life and 10 percent yield increase, Mr. Dietrich should not invest in the tile drainage project since the net present value (NPV) is negative. The net present value (NPV) will increase if the tile drainage could be effective for 50 years.

Understand the calculations in the spreadsheet "Tile Drainage". Which of the following statement(s) is/are correct? Select all that apply. The tile drainage project will pay for itself in 10 years. The discount rate is 10%. Based on the current assumptions of 25 years useful life and 10 percent yield increase, Mr. Dietrich should not invest in the tile drainage project since the net present value (NPV) is negative. The net present value (NPV) will increase if the tile drainage could be effective for 50 years.

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Crop
Expected yield per acre without drainage
Yield boost 10%
Expected price per acre:
Additional revenue per acre
Additional revenue
Average
A
Acres tiled
Price per acre for tile
Total investment
Tax rate
Capital cost allowance (depreciation)
Discount rate
Expected yield boost
Year
4
...
0
1
2
3
4
5
6
7
GRE22856456E5000
11
12
13
14
15
16
17
18
19
21
23
Corn
B
Profitability Ratios
220
22
5
117
17,490
14.145
150
1,500
225,000
15%
25%
6%
10%
UCC Beginnir CCA
225,000
196,875
147,656
110,742
83,057
62.292
46.719
35,040
26.280
19,710
14.782
11,087
8.315
6,236
4,677
3.508
2,631
1,973
1.480
1.110
832
624
468
C
Soybeans
351
263
198
58
6
16
93
13,920
28,125
49,219
36,914
27,686
20,764
15.573
11,680
8,760
6,570
4.927
3.696
2,772
2.079
1,559
1.169
877
658
493
370
277
208
156
117
88
66
49
Ratio Analysis
D
Wheat
E
105
11
7
74
11,025 150 acre
UCC Ending
196,875 half year rule
147,656
110,742
83,057
62.292
46,719
35,040
26,280
19,710
14,782
11,087
8,315
6,236
4,677
3,508
2,631
1,973
1,480
1.110.
832
624
468
351
263
198
148
F
Depreciation Tax Saving
4,219
% of Sales Method
7.383
5,537
4.153
3,115
2.336
1,752
1,314
985
739
554
416
312
234
175
132
99
74
55
42
31
23
18
C... +
13
10
7
⠀
4
G
H
J
Investment Increase revenue After Tax Cashflow
(225,000)
14.145
14.145
14,145
14.145
14.145
14,145
14.145
14.145
14.145
14.145
14,145
14,145
14,145
14,145
14.145
14.145
14.145
14.145
14,145
14.145
14,145
14,145
14.145
14.145
14.145
(187,031)
19,406
17,560
16.176
15,138
14.359
13,775
13,337
13,009
12,762
12.578
12,439
12.335
12.257
12.199
12.155
12,122
12,097
12,079
12,065
12.054
12,047
12.041
12,036
12,033
12,031
(9.522.41) NPV
K
▶

Understand the calculations in the spreadsheet "Tile Drainage". Which of the
following statement(s) is/are correct? Select all that apply.
The tile drainage project will pay for itself in 10 years.
The discount rate is 10%.
Based on the current assumptions of 25 years useful life and 10 percent yield
increase, Mr. Dietrich should not invest in the tile drainage project since the net
present value (NPV) is negative.
The net present value (NPV) will increase if the tile drainage could be effective
for 50 years.

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