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CMW Ltd is reviewing an investment proposal. The initial costs as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Year Initial Cost and Book Value Annual Net After-Tax Cash Flows Annual Net Income0 $105,000 1 $ 70,000 $50,000 $15,0002 $ 42,000 $45,000 $45,0003 $ 21,000 $40,000 $19,000 4 $ 7,000 $35,000 $21,0005 0 $23,000 $23,000Management uses a 16 percent after-tax target rate of return for new investment proposals. Required: (a) Compute the following for the investment proposal: (i) Payback period. For this purpose only, assume that the cash flows in years 1 to 5 occur uniformly throughout each year. (ii) Accounting rate of return. Based you calculation on the initial cost of the investment. (iii) Net present value. (iv) Internal rate of return.
You read in the wall street journal that 30 day US treasury bills are currently yielding 8%. your brother in law, a broker, a broker at Kyoto Securities, has given you the following estimates of current interest rate premiums:
What are the tax consequences to Oriole Corporation on the distribution of the land? If the land is, instead, subject to liability of $700,000, what are the tax consequences to Oriole on the distribution?
Prepare journal entries to record, Jan. 10 sold 102,000 shares of commone stock for $8 cash per share. Jan 15 Exchanged 10,000 shares of common stock for equipment with a market value of $80,000. Feb. 1 Exchanged 500 shares of common stock for $3,..
Last year, Katt Co. reduced the carrying amount of its long-lived assets used in operations from 120,000 to 100,000, in connection with its annual impairment review. During the current year, Katt determined that the fair value of the same assets h..
Misty's effective tax rate is 40% and there were 1,000 shares of common stock outstanding.
Phyllis believes that the firm should use straight-line depreciation for a capital project because it results in higher net income during the early years of the project's life.
On March 1, 2005, Andrews Corporation issued $900,000, 8%, 5-year bonds dated January 1, 2005, for $834,500, including accrued interest. The bonds pay semi-annual interest on January 1 and July 1 and mature on January 1, 2010. The company uses the..
Compute Juan's gross income assuming that he uses the cash basis of accounting.
Only executives are permitted to buy yogurt machines at a discount. What is Sarah's adjusted basis for the yogurt machine and how much must she include in her gross income?
Write down a one-half page memorandum (at least 2 paragraphs) to Terrio explaining why the $6,000 loss on sale of Blackhawk stock is
Describe the following trade controls: Tariffs, subsidies, and quotas. How do these trade controls affect relationship of trading partners and what is their value in international business.
Compute the quick and current liquidity ratios, the DuPont ratio, profit margin, asset utilization, and financial leverage for your chosen company.
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