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Pine & Oak have spent €20,000 researching the prospects for a new range of products. If it were decided that production is to go ahead an investment of €240,000 in capital equipment will be required. The accounts department has produced budgeted profit and loss statements for each of the next five years for the project. At the end of Year 5 the capital equipment will be sold and production will cease. The capital equipment is expected to be sold for scrap at the end of Year 5 for €40,000. Projected Profit/loss (in €000s) Year 1 Year 2 Year 3 Year 4 Year 5 Sales 400 400 400 320 200 Materials 240 240 240 192 120 Other variable costs 40 40 40 32 20 Overheads 20 20 24 24 24 Depreciation 40 40 40 40 40 Net profit/(loss) 60 60 56 32 (4) When production start it will be necessary to raise material stock levels by €30,000 and other working capital by €20,000. Both the additional stock and other working capital increases will be released at the end of the project. Customers receive one year's credit from the company. The overhead figures in the budgeted accounts have two elements - 60% is due to a reallocation of existing overheads, 40% is directly incurred because of the take-up of the project. For the purposes of this appraisal, regard all receipts and payments as occurring at the end of the year to which they relate. The company's cost of capital is 12%. Ignore inflation or tax. Appraise the project using NPV approach. Should the company go ahead? Why or why not?
Assuming Hydra uses the perpetual inventory system and the net method of accounting for purchase discounts, what amount is recorded as inventory from this purchase?
Ford county lieves for its general fund $2,000,000 in property taxes. In addition, the county is responsible for collecting $4,000,000 in property taxes for the consolidated school district and $1,000,000 in property taxes for a town within the co..
Compute the breakeven analysis in sales dollars for the company.
Johnson's borrowed $150,000 at a 12 percent annual interest rate on April 1, 2010, to expand its boat storage facility. The loan requires Johnson's to pay the interest quarterly until the note is repaid in three years. Johnson's paid quarterly int..
Robert Brown age 21 is a full time student at Marshall college and a degree candidate for a bachelor's degree. During 201 he received the following payments. what is robert's adjusted gross income for 2010
Transportation costs incurred by a manufacturing company to ship its product to its customers would be classified as which of the following?
To measure controllable production inefficiencies, which of the following is the best basis for a company to use in establishing the standard hours allowed for the output of one unit of product?
Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? Explain.
The accountant for the Orion Sales Company is preparing the income statement for 2007 and the balance sheet at December 31, 2007. Orion uses the periodic inventory system. The January 1, 2007 merchandise inventory balance will appear:
Excluding the cost of the machinery, additional operating costs are expected to be $15,000 per year. If the firm requires a minimum 12% return on its investment, what is the maximum price the company can pay for this equipment?
P Corporation acquired 80% of S Corporation on January 1, 2011 for $240,000 cash when S's stockholders' equity consisted of $100,000 of Common Stock and $30,000 of Retained Earnings. The difference between the price paid by P and the underlying eq..
What amounts of the current general business credit and carryovers are utilized against the 2008 income tax liability? What is the amount of unused credit carried forward to 2009?
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