The project will also utilize other equipment that the consultants did not value separately because the equipment is already owned and not being used in other projects.The equipment could instead be donated to a charity, and the tax benefit of that donation would be $2.3 million (in other words, this is the total amount that your taxeswould decrease by in period 0, if you donated the equipment rather than using it for the project). In addition, donating the equipment would generate goodwill andincreased reputation which you feel would be worth an additional $1.7 million (in dollars today).What are the correct free cash flows (FCFS) for evaluating this project? Start from the correct Net Income which has already been given, and make any additionaladjustments needed for any periods, in order to get the entire set of FCFS. Do not calculate the NPV – just give the FCF stream. Show your calculations but do notexplain them except to label the numbers you give.[Note: Do not write an essay or explain concepts. Just show me your numbers, properly labeled (by labels, I mean row and column headings such as "Depreciation"or "Year 3"), and make the calculations clear (are you adding or subtracting?). I'd prefer that you keep the column/row formatting othe earlier calculations. Do NOTrepeat the numbers before Net Income - just show the calculations after that, and the final CFs for each period. And please do not change the units - I'd like theanswers in millions of dollars, not in dollars.]G You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "We owe these consultants $1.8 million for this report,and I am not sure their analysis makes sense. Before we spend $39 million on new equipment needed for this project, look it over and give me your opinion." Here arethe report's estimates (in millions of dollars; note that the question is continued below, so you need to scroll down to see it all):13Sales revenue64.064.040.0, 24.064.0- Cost of goods soldGross profit-Selling, gen. & admin. exp.-DepreciationNet operating income- Income tax (30%)Net Income40.040.024.024.03.83.83.813.013.013.07.27.27.22.22.22.25.05.05.0Everything that the consultants have calculated is correct, as far as it goes. The project will require $18 million in working capital upfront (year 0), which will be fully

Depreciation is a non cash expenses. So this expense should be added back to calculate the free cash…

You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "We owe these consultants $1.8 million for this report, and I am not sure their analysis makes sense. Before we spend $39 million on new equipment needed for this project, look it over and give me your opinion." Here ar the report's estimates (in millions of dollars; note that the question is continued below, so you need to scroll down to see it all): 1 3 Sales revenue - Cost of goods sold Gross profit -Selling, gen. & admin. exp. -Depreciation Net operating income - Income tax (30%) 64.0 64.0 40.0 24.0 64.0 40.0 40.0 24.0 24.0 3.8 3.8 3.8 13.0 13.0 7.2 13.0 7.2 7.2 2.2 2.2 2.2 Net Income 5.0 5.0 5.0 Everything that the consultants have calculated is correct, as far as it goes. The project will require $18 million in working capital upfront (year 0), which will be fully

You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "We owe these consultants $1.8 million for this report, and I am not sure their analysis makes sense. Before we spend $39 million on new equipment needed for this project, look it over and give me your opinion." Here ar the report's estimates (in millions of dollars; note that the question is continued below, so you need to scroll down to see it all): 1 3 Sales revenue - Cost of goods sold Gross profit -Selling, gen. & admin. exp. -Depreciation Net operating income - Income tax (30%) 64.0 64.0 40.0 24.0 64.0 40.0 40.0 24.0 24.0 3.8 3.8 3.8 13.0 13.0 7.2 13.0 7.2 7.2 2.2 2.2 2.2 Net Income 5.0 5.0 5.0 Everything that the consultants have calculated is correct, as far as it goes. The project will require $18 million in working capital upfront (year 0), which will be fully

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 5TP: You own a construction company and have recently received a contract with the local school district...

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You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "We already owe these consultants $1.8 million for their first report, and all they gave us is Net Income. Before we spend another $1.4 million on further market research plus $21 million on new equipment needed for this project, look the first report over and give me your opinion." Here are the report's estimates (in millions of dollars; note that the question is continued below, so you need to scroll down to see it all): 1 Sales revenue 64.0 64.0 64.0 - Cost of goods sold Gross profit -Selling, gen. & admin. exp. -Depreciation Net operating income - Income tax (30%) Net Income 41.0 41.0 41.0 23.0 23.0 23.0 8.8 8.8 8.8 7.0 7.0 7.0 7.2 7.2 7.2 2.2 2.2 2.2 5.0 5.0 5.0
You own a construction company and have recently received a contract with the local school district to refurbish one of its elementary schools. You are given an up-front payment from the school district in the amount of $5 million. The contract terms extend from years 2018 to 2020. When would you recognize revenue for this payment? What method of accounting would you use for this construction project and why? What would be the benefits and challenges with your method selection? Give an example of your distribution selection and associated costs of the project (you may estimate based on other industry competitors). What might be some benefits and challenges associated with the other method of construction revenue recognition?
The Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of a special equipment for the Materials Handling Department. The projected annual operating revenues and expenses are as follows: 1. How much is the after tax cash flows of Project 1? 2. How much is the net benefit of investing in Project 2?
A lodging property wishes to change its lighting system with the most efficient ones. The old system will be sold in the market and the new system will cost $500,000. The new investment does not require an additional outlay but it needs incremental working capital of $48,000. The old lighting system can be sold for $200,000 in the market which is an equivalent of its books value. Moreover, the new investment will not have incremental sales revenue but it will have incremental operating costs of $22,000, and incremental depreciation of $11,000 for the first year. There is no expected change in net working capital after the project is undertaken and no estimated salvage value for the first year. For the second year, suppose that there is 12.00% increase in operating costs and depreciation. At the end of the second year, the estimated salvage value is $10,000 on the new lighting system. What are the net investment and net cash flow for the first and second year for this investment (assume…
A small start-up construction company has won the bid to build a school playground.The company needs one excavator to dig the ground at the start of theconstruction project. The company does not have the finances to buy the excavator.Suggest two possible products from Islamic finance to the company. Of the twosolutions, which is better and why?
The senior VP in charge has asked that you make a recommendation for the purchase of new equipment.Ideally, the company wants to limit its capital investment to $500,000. However, if an asset meritsspending more, an investment exceeding this limit may be considered. You assemble a team to helpyou. Your goal is to determine which option will result in the best investment for the company. Toencourage capital investments, the government has exempted taxes on profits from new investments.This legislation is to be in effect for the foreseeable future.The average reported operating income for the company is $1,430,500.The company uses an 11% discount rate in evaluating capital investments.The team is considering the following optionsOption 1:The asset cost is $300,000.The asset is expected to have an 8-year useful life with no salvage value.Straight-line depreciation is used.The net cash inflow is expected to be $62,000 each year for 8 years.A significant portion of this asset is made from…
You are the project manager for Becker Enterprises, LTD. and have been asked to analyze two alternatives for the company’s newest plastics The two alternatives, A and B, will perform the same task, but Alternative A will cost $80,000 to purchase while Alternative B will cost only $55,000. Moreover, the two alternatives will have very different cash flows and useful lives. The after-tax costs for the two projects are as follows: Year A B 0 $(80,000) $(55,000) 1 (20,000) (6,000) 2 (20,000) (6,000) 3 (20,000) (6,000) 4 (20,000) 5 (20,000) 6 (20,000) 7 (20,000) Calculate each project’s EAC, given a 10% discount Which of the alternatives do you think the company should select and why?
Your company is evaluating an investment project. The project would require buying a piece of machinery that costs $23.43 million dollars. As part of the effort to raise money for the project, your company will also sell an old piece of machinery right away which will generate an estimated after-tax salvage of $11.39 million dollars. Assuming the above are all the investment-related activities for your company. What're the project's initial cash flows from investing activities? Note: your answer should be in millions of dollars.
Assume that Rolando Corporation is considering the renovation and/or replacement of some of its older and outdated carpet-manufacturing equipment. Its objective is to improve the efficiency of operations in terms of both speed and reduction in the number of defects. The company’s finance department has compiled pertinent data that will allow it to conduct a marginal cost–benefit analysis for the proposed equipment replacement. The cash outlay for new equipment would be approximately $600,000. The net book value of the old equipment and its potential net selling price add up to $250,000. The total benefits from the new equipment (measured in today’s dollars) would be $900,000. The benefits of the old equipment over a similar period of time (measured in today’s dollars) would be $300,000. TO DO Create a spreadsheet to conduct a marginal cost–benefit analysis for Rolando Corporation, and determine the: 1. The marginal (added) benefits of the proposed new equipment. *
Assume that Rolando Corporation is considering the renovation and/or replacement of some of its older and outdated carpet-manufacturing equipment. Its objective is to improve the efficiency of operations in terms of both speed and reduction in the number of defects. The company’s finance department has compiled pertinent data that will allow it to conduct a marginal cost–benefit analysis for the proposed equipment replacement. The cash outlay for new equipment would be approximately $600,000. The net book value of the old equipment and its potential net selling price add up to $250,000. The total benefits from the new equipment (measured in today’s dollars) would be $900,000. The benefits of the old equipment over a similar period of time (measured in today’s dollars) would be $300,000. TO DO Create a spreadsheet to conduct a marginal cost–benefit analysis for Rolando Corporation, and determine the: 3. The net benefit of the proposed new equipment. *
Assume that Rolando Corporation is considering the renovation and/or replacement of some of its older and outdated carpet-manufacturing equipment. Its objective is to improve the efficiency of operations in terms of both speed and reduction in the number of defects. The company’s finance department has compiled pertinent data that will allow it to conduct a marginal cost–benefit analysis for the proposed equipment replacement. The cash outlay for new equipment would be approximately $600,000. The net book value of the old equipment and its potential net selling price add up to $250,000. The total benefits from the new equipment (measured in today’s dollars) would be $900,000. The benefits of the old equipment over a similar period of time (measured in today’s dollars) would be $300,000. TO DO Create a spreadsheet to conduct a marginal cost–benefit analysis for Rolando Corporation, and determine the: 2. The marginal (added) cost of the proposed new equipment. *
All equipment costs will continue to be depreciated on a straight-line basis. For simplicity, ignore income taxes and the time value of money. Q. Now suppose the one-time equipment cost to replace the production equipment is somewhat negotiable. All other data are as given previously. What is the maximum one-time equipment cost that TechGuide would be willing to pay to replace rather than upgrade the old equipment?