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Fast Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Fast Delivery recently acquired approximately $6million of cash capital from it owners, and its president Don, is trying to identify the most profitable way to invest these funds. One manager believes that the money should be used to expand the fleet of city vans at a cost of $720.000. He argues that more vans would enable the company to expand its services into new markets, thereby increasing the revenue base. More specifically he expects cash inflow to increase by $280.00 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $100,000. Operating the vans will require additional working capital of $40,000 which will be recovered at the end of the fourth year. In contrast, the company chief accountant, believes that the funds should be used to purchased large trucks to deliver the package between the depots in the two cities. The conversion process would produce continuing improvement in operating savings with reductions in cash outflow as the following. Year 1 $160,000 Year 2 $320,000 Year 3 $400,000 Year 4 $440,000 The large trucks are expected to cost $800,000 and to have a four-year useful life and a $80,000 salvage value. In additional to the purchase price of the trucks, up-front training cost are expected to amount to $16,000. Fast Delivery's management has established a 16 percent desired rate of return. Required A. Determine the net present value of the two investment alternatives. B. Calculate the present value index for each alternative. C. Indicate which investment alternative you would recommend. Explain the choice.
Which of the following statements about required disclosures in segmental reporting is not true?
Juan's Taco Corporation has restauraunts in five college towns. Juan wants to expand into Austin and College Station and needs a bank loan to do this. Mr. Bryan, the banker,.
Additional information about the Flower Shoppe that is needed for financial-statement preparation:
1. discuss the advantages and disadvantages associated with the decision to implement the new system using the big bang
Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.
Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?
Matching principle because the cash was paid in 2010 and should be expensed in 2010. Matching principle because depreciation expense should be $8,000.
The actual variable factory overhead is $32,000. In the current period, 2500 units are produced at a standard time of 2 labor hours per unit. These units require 5,500 actual labor hours. What is the controllable variance?
What is the income reported by Regal during 2012 pertaining to the Air investment?
These amounts include $30,000 of monthly depreciation plant and equipment expense. Cash payments are paid such that 60% are paid in the month incurred and 40% are paid in the following month. What are the budgeted cash payments for August?
King Pin issues $1,000,000 0f 12%. 10 year bonds that are dated Jan. 1, 2009. The first interest payment is due June 30, 2009 (Hint: interest is paid semi-annually). Record the issuance of the bonds and the first interest payment for each situation.
Jose purchased a house for $175,000 in 2005. He used the house as his personal residence. In March 2008, when the fair market value of the house was $255,000, he converted the house torental property.
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