Assume that supermart inc has decided to surface and

Assignment Help Accounting Basics

Reference no: EM13598433

Assume that Supermart, Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its discount-retail outlets to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 12,800 square yards.

Bid A: A surface that costs $5.76 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 26 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface.

Bid B: A surface that costs $10.59 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 10 cents per square yard.

Calculate the present value of outflows for Bid A & B and then determine which bid should be accepted by Supermart Inc. You may assume that the cost of capital is 9%, that the annual maintenance expenditures are incurred at the end of each year, and that prices are not expected to change during the next 10 years.

Reference no: EM13598433

Questions Cloud

How much revenue per account would be sufficient for sprint : sprint nextel is one of the largest digital wireless service providers in the united states. in a recent year it had

Solex company manufactures three products from a common : solex company manufactures three products from a common input in a joint processing operation. joint processing costs

What arguments can be advanced in favor of treating fixed : what arguments can be advanced in favor of treating fixed manufacturing overhead costs as product costs? what arguments

Calculate the number of pounds of raw materials to be : osage inc.. has actual sales for june and july and forecast sales for august september october and november as follows

Assume that supermart inc has decided to surface and : assume that supermart inc. has decided to surface and maintain for 10 years a vacant lot next to one of its

Choose two competitor companies that are us gaap publicly : choose two competitor companies that are u.s. gaap publicly traded companies. determine and compare their net profit

Prepare a schedule of cash collections from sales by month : rolen inc. is in the process of preparing the fourth quarter budget for 2010 and the following data have been

The patent was acquired in january 2010 and has a useful : p9-4b the intangible assets section of the balance sheet for gore company at december 31 2010 is presented here.patents

Investors and creditors are interested in the probability : 1. investors and creditors are interested in the probability that their original investment or loan will eventually be

User Account

All Pages