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Ocean Division currently earns $780,000 and has divisional assets of $3.9 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $675,000 and will have a yearly cash flow of $168,000. The asset will be depreciated using the straight-line method over a six-year life and is expected to have no salvage value. Divisional performance is measured using ROI with beginning-of-year net book values in the denominator. The company's cost of capital is 15 percent. Ignore taxes. The division manager learns that he has the option to lease the asset on a year-to-year lease for $148,000 per year. All depreciation and other tax benefits would accrue to the lessor. Required: (a) What is the division's residual income before considering the project? (Enter your answers in dollars and not in millions of dollars.) (b) What is the division's residual income if the asset is purchased? (Enter your answers in dollars and not in millions of dollars.) (c) What is the division's residual income if the asset is leased?
What is the net present value of the proposed investment ignore income taxes and depreciation and assuming a 5-year straight-line depreciation, how will this impact the factory's fixed costs for each of the 5 years (and the implied product costs)? ..
Valuation of Bond at applicable inflation rates and change in the risk free rates and what rate should you see for a three-year-maturity Treasury Bond in today's Wall Street Journal ?
Sources of increases to stockholder's equity are
Determine the amount of the lease payments. Provide the entries required on the lessor's books to record the lease and the first payment. Calculate the total income to be recognized by ABC Company in the first year of the lease.
The selling price of the equipment is $325,000, and the rate implicit in the lease is 8%, which is known to Silver Point Co. What is the book value of the leased asset at December 31, 2011, and what is the balance in the Lease Liability account?
What is the new equilibrium price level and level or real output? I need answers with charts
Lark Art Company sells unfinished wooden decorations at a price of $15.00. The current profit margin is $5.00 per decoration. The company is considering taking individual orders and customizing them for sale. To finish the decoration the company woul..
Prepare Topsanahs Income statement for the period ended 31 December 2011 and prepare Topsanah's Balance sheet as at 31 December 2011
Assume that the quantity demanded at the price calculated in part a is only 600 units. Illustrate what are the full costs of the globe, and what is the price with a 25 percent markup?
descriptive questions - discount on bills payable.1. if an organization purchases 700 of supplies on account with terms
For the analysis of financial position, compute McDonough Products' (a) Current ratio and (b) Debt ratio. Compare these ratios with the industry averages. Is McDonough Products' financial position better or worse than the average for the industry?
If her standard deduction is $4,750 and she incurs the following costs related to housing, how much tax savings will she receive as a result of her home purchase?
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