Virtual learning expects net revenues, Financial Accounting

Assignment Help:

Virtual Learning Inc., an Ontario-based company on the cutting edge of technology, is analyzing the possibility of providing university-level courses for York University. This virtual university setting would provide the next generation of online courses by using 3D simulated digital environment where users can attend lectures, work on group assignments, write exams and socialize using their own avatar. You have been hired by Virtual Learning to perform an NPV analysis on the project.  Below are the estimated expenses and revenues. Assume the cost of capital is 7% and the expected life of this new generation of online courses is four years.

  • Annual revenues: $900,000 first year, growing at an annual rate of 30% thereafter.
  • Annual expenses: $175,000 first year, declining at an annual rate of 3% thereafter.
  • Increase in working capital: $160,000 immediately, half of which will be recovered at the end of year 3 and the remainder recovered at the end of year 4.
  • Cost of R&D incurred over the past two years: $350,000
  • Cost of equipment: $3,000,000
  • Expected salvage value at the end of 4 years: $50,000
  • CCA rate: 40% declining balance (half-year rule applies)
  • Tax rate: 10% (low rate due to tax subsidies received from Ontario government)

 

As well, Virtual Learning expects net revenues (after-tax) from existing online courses it supplies to be reduced by $150,000 each year.

(a) Should York proceed with this virtual course project?

(b) Does your decision change if depreciation is calculated straight-line (over four years), instead of declining balance?  (the half-year rule still applies).


Related Discussions:- Virtual learning expects net revenues

Retained earnings, Q. Retained earnings is increased by each of the followi...

Q. Retained earnings is increased by each of the following except a. some disposals of treasury stock. b. net income. c. prior period adjustments. d. All of these increase retained

Describe how it is helpful for management decision makings, Question: (...

Question: (a) Describe how cost concepts and behavior can be important to Management. (b) What do you meant by "flexing" the Budget? Describe the importance of flexible bud

Define accounting, Question 1 Define Accounting. Briefly explain the ‘Enti...

Question 1 Define Accounting. Briefly explain the ‘Entity Concept' and ‘Money Measurement Concept' of accounting Question 2 What is rectification of errors? List and explain the

Differences between estates and trusts-executorship laws, Differences betwe...

Differences between estates and trusts Note particularly the following differences between estates and trusts:— 1. Estate: on the death of a testator or an intestate, all

Prepare a lease amortization schedule, LessorMfg Corp. is a manufacturer of...

LessorMfg Corp. is a manufacturer of heavy equipment. On January 1, 2013, LessorMfg Corp. leases equipment to Small Company under a six-year noncancelable lease agreement. The foll

Break-even point, am trying to figure out the break-even point in units usi...

am trying to figure out the break-even point in units using the mathmatical equation. the numbers i have are unit selling price $520, the variable costs per unit are $312 and fina

Receiver necessary statement-bankruptcy, Receiver necessary statement T...

Receiver necessary statement The receiver may, if necessary, require the statement to be submitted by: Past or present officers of the company Persons who have taken

Determine the accounting aspects of business, Determine the accounting aspe...

Determine the accounting aspects of business Accounting scandals can have a profound effect on all those connected with business. Enron scandal, for instance, ultimately led t

The accounting equation., Indicate how each of the following transactions a...

Indicate how each of the following transactions affects the accounting equation. a.Purchase of supplies on account. b.Payment of wages. c.Cash sale of goods for more than their cos

History of trust-trusts laws and accounts, History of trust The followi...

History of trust The following general information should be kept with the trust documents: Summary of will or trust deed; Short history of the trust; Trustees’ nam

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd