Answer:
$18.20 million
Explanation:
Net present value = Initial cost + (Annual cost/3%)
Net present value = $600 million + $200,000/3%
Net present value = $600 million + $6.67 million
Net present value = $606.67 million
Annualized cost = Net present value * 3%
Annualized cost = $606.67 million * 3%
Annualized cost = $18.20 million
So, the annualized cost of the bridge project is $18.20 million.
Seth's Tax Services had the following accounts and account balances after adjusting entries. Assume all accounts have normal balances.
Prepare the adjusted trial balance for Seth's Tax Services as of December 31, 2018.
Cash $ ?
Land 26,000
Utilities Payable 150
Accounts Payable 3,700
Accumulated Depreciation—Equipment 1,800
Service Revenue 75,000
Supplies Expense 1,100
Dividends14,000
Equipment $11,000
Accounts Receivable 4,950
Office Supplies 700
Common Stock 22,600
Utilities Expense 1,650
Unearned Revenue 900
Depreciation Expense—Equipment 1,900
Salaries Expense 5,600
Answer and Explanation:
The preparation of the trial balance is presented below:
Particulars Debit Credit
Cash 37250
Accounts Receivable 4950
Office Supplies 700
Equipment 11000
Accumulated
Depreciation - Equipment 1800
Land 26000
Accounts Payable 3700
Utilities Payable 150
Unearned Revenue 900
Common Stock 22600
Dividends 14000
Service Revenue 75000
Salaries Expense 5600
Depreciation
Expense - Equipment 1900
Supplies Expense 1100
Utilities Expense 1650
Total 104150 104150
Required information
A bank reconciliation proves the accuracy of the depositor's and the bank's records. The bank statement balance is adjusted for items such as outstanding checks and unrecorded deposits made on or before the bank statement date but not reflected on the statement. The book balance is adjusted for items such as service charges, bank collections for the depositor, and interest earned on the account. The company's bank reconciliation at June 30 included interest earned in the amount of $150. Complete the necessary journal entry .
Answer:
Date Account Title Debit Credit
June 30 Cash $150
Interest revenue $150
Explanation:
Interest earned is considered to be revenue so it will be credited to the interest revenue account.
Cash will be debited because the interest revenue increased it and assets are debited when they increase.
Shanghai Company sells glasses, fine china, and everyday dinnerware. It uses activity-based costing to determine the cost of the shipping and handling activity. The shipping and handling activity has an activity rate of $8 per pound. A box of glasses weighs 2 pounds, a box of fine china weighs 4 pounds, and a box of everyday dinnerware weighs 6 pounds. Round answers to the nearest whole dollar.
a. Determine the shipping and handling activity for each product.
Glasses $
China $
Everyday dinnerware $
b. Determine the total shipping and receiving costs for the china if 3,500 boxes are shipped.
$
Answer and Explanation:
The computation is shown below:
a. For shipping and handling activity for each product is
For Glasses
= $8 × 2
= $12
For China
= $8 × 4
= $32
And, for Everyday dinner ware
= $8 × 6
= $48
b. the total shipping and receiving costs for the china is
= 3,500 × $32
= $112,000
Hence, in this way the parts could be determined
Atlanta Company, had an ROA of 6.5 percent, a profit margin of 11.50 percent, and sales $20 million. Calculate Atlanta's total assets. Show your calculation
Answer:
The right solution is "35.39".
Explanation:
Given:
Profit margin,
= 11.50%
or,
= 0.115
ROA,
= 6.5%
or,
= 0.065
Sales,
= $20 million
As we know,
⇒ [tex]Profit \ margin = \frac{Net \ income}{Sales}[/tex]
or,
⇒ [tex]Net \ income = Sales\times Profit \ margin[/tex]
[tex]=20\times 0.115[/tex]
[tex]=2.3[/tex]
hence,
The total asset will be:
⇒ [tex]ROA = \frac{Net \ income}{Total \ assets}[/tex]
or,
⇒ [tex]Total \ assets = \frac{Net \ income}{ROA}[/tex]
[tex]=\frac{2.3}{0.065}[/tex]
[tex]=35.39[/tex]
Fixed Overhead Spending and Volume Variances, Columnar and Formula Approaches.
Branch Company provided the following information:
Standard fixed overhead rate (SFOR) per direct labor hour $5.00
Actual fixed overhead $305,000
BFOH $300,000
Actual production in units 16,000
Standard hours allowed for actual units produced (SH) 64,000
Required:
a. Calculate the fixed overhead spending and volume variances.
b. Calculate the fixed overhead spending variance.
c. Calculate the total fixed overhead variance.
Answer:
a. Fixed overhead spending variance:
= Actual fixed overhead - Budgeted Flexible overhead
= 305,000 - 300,000
= $5,000 Unfavorable
Fixed overhead volume variance:
= (Standard fixed overhead rate (SFOR) per direct labor hour * Standard hours allowed for actual units produced ) - Budgeted Flexible overhead
= (5 * 64,000) - 300,000
= $20,000 favorable
b. Fixed overhead spending variance:
= Actual fixed overhead - Budgeted Flexible overhead
= 305,000 - 300,000
=$5,000 Unfavorable
c. Fixed overhead variance:
= (Standard fixed overhead rate (SFOR) per direct labor hour * Standard hours allowed for actual units produced ) - Actual fixed overhead
= (5 * 64,000) - 305,000
= $15,000 favorable
How does the price range affect the elasticity of demand for a product?
Demand for all goods is elastic if the price is low enough.
Price range has little or no effect on elasticity of demand for a good.
Demand for a good can be inelastic at a low price, but elastic at a high price.
Demand for a good can be elastic at a low price but inelastic at a high price.
Answer:
How does the price range affect the elasticity of demand for a product?
Demand for all goods is elastic if the price is low enough.
Price range has little or no effect on elasticity of demand for a good.
Demand for a good can be inelastic at a low price, but elastic at a high price.
Demand for a good can be elastic at a low price but inelastic at a high price.
Explanation:
How does the price range affect the elasticity of demand for a product?
Demand for all goods is elastic if the price is low enough.
Price range has little or no effect on elasticity of demand for a good.
Demand for a good can be inelastic at a low price, but elastic at a high price.
Demand for a good can be elastic at a low price but inelastic at a high price.
Answer:
the answer is demand for a good can be inelastic at a low price, but elastic at a high price.
Explanation:
Mahogany Inc. has an unfavorable total labor variance of $770 for the month of September. It had a favorable labor rate variance of $205. Determine the labor efficiency variance of Mahogany for the month of September. g
Answer:
$975 Unfavorable
Explanation:
Calculation to Determine the labor efficiency variance of Mahogany for the month of September
Using this formula
Labor efficiency variance=Unfavorable total labor variance + Favorable labour rate variance
Let plug in the formula
Labor efficiency variance=$770+$205
Labor efficiency variance=$975 Unfavorable
Therefore the labor efficiency variance of Mahogany for the month of September is $975 Unfavorable
Q.1.1
If the Owners Equity of a certain business is equal to R70 000 and the assets of the
same business are equal to R120 000, what would the total liabilities of the
business be?
(a) 50 000
(b)
190 000;
(c)
70 000;
(d)
120 000
Answer:
The answer of this question is (B)190000
Schweser Satellites Inc. produces satellite earth stations that sell for $95,000 each. The firm's fixed costs, F, are $2.5 million, 50 earth stations are produced and sold each year, profits total $500,000, and the firm's assets (all equity financed) are $4 million. The firm estimates that it can change its production process, adding $4.5 million to assets and $380,000 to fixed operating costs. This change will reduce variable costs per unit by $12,000 and increase output by 15 units. However, the sales price on all units must be lowered to $88,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 16%, and it uses no debt. What is the incremental profit
Answer:
Schweser Satellites Inc.
The incremental profit is:
= $845,000
Explanation:
a) Data and Calculations:
Selling price of Satellite Earth Station = $95,000 each
Total sales revenue = $4,750,000 ($95,000 * 50)
Fixed costs, F = $2.5 million
Annual production and sales units = 50 units
Total profits = $500,000
Total contribution = $3 million ($2.5 m + $500,000)
Variable costs = $1,750,000 ($4,750,000 - $3,00,000)
Variable cost per unit = $35,000 ($1,750,000/50)
Assets = $4 million
Equity = $4 million
Additional assets = 4.5 million
Additional fixed operating costs = $380,000
New assets = 8.5 million
Fixed operating costs = $2.88 million
Variable cost reduction per unit = $12,000
New variable cost per unit = $23,000 ($35,000 - $12,000)
Production and sales units = 65 (50 + 15)
New selling price per unit = $88,000
Cost of equity = 16%
Tax rate = 0%
Profit under new arrangements:
Contribution per unit = $65,000 ($88,000 - $23,000)
Total contribution margin = $4,225,000 ($65,000 * 65)
Fixed operating costs = $2,880,000
Net operating profit $1,345,000
Incremental profit = $845,000 ($1,345,000 - $500,000)
How much increase in net worth (equity) would a market basis balance sheet show over a cost basis if Land was purchased for $1,000,000, is currently valued at $5,500,000 and capital gains taxes are 10%
Answer: $4,050,000
Explanation:
Increase in net worth shows the after tax gain that the person got after the land in question increased in value.
= (Current value - Purchase price) * ( 1 - tax rate)
= (5,500,000 - 1,000,000) * (1 - 10%)
= 4,500,000 * 0.90
= $4,050,000
If an investor has a choice of investing money at 6% compounded daily or 6.025% compounded quarterly which one is best
General Rule: Daily compounding gives a higher yield
Compounding works like this:
6.025% per quarter
Quarter 1: $100 x 6.025% = $6.025
Quarter 2: $106.025 x 6.025% = $6.388
Quarter 3: $112.413 x 6.025% = $6.7729
Quarter 4: $119.186 x 6.025% = $7.4491
Etc…
6% per day
Day 1: $100 x 6% = $6
Day 2: $106 x 6% = $6.36
...
Day 365: $193.47 x 6% = $11.96
A company is considering eliminating a department that has an annual contribution margin of $33,000 and $66,000 in annual fixed costs. Of the fixed costs, $16,500 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be: Multiple Choice ($33,000) $33,000 ($16,500) $16,500
Answer:
($16,500)
Explanation:
Calculation to determine The annual financial advantage (disadvantage) for the company of eliminating this department would be
First step is calculate the Avoidable fixed costs
Avoidable fixed costs = $66,000 − $16,500
Avoidable fixed costs = $49,500
Now let determine Segment Margin
Contribution Margin $33,000
Less Avoidable fixed costs $49,500
Segment Margin ($16,500)
Therefore The annual (disadvantage) for the company of eliminating this department would be ($16,500)
A company changes from the straight-line method to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change will include a
Answer: c. credit to Accumulated Depreciation.
Explanation:
When using the accelerated method of depreciation, depreciation amounts are higher in the earlier years unlike the straight-line method where depreciation is constant throughout the life of the asset.
The difference between the depreciation according to Straight-line and depreciation will be sent to the accumulated depreciation account as a credit to reflect the change and the depreciation for the period.
Klear Manufacturing sells its plant with a cost of $1.2 million to Burt Company for $1.4 million and immediately leases it back for a 15-year term. The transaction does not meet the revenue recognition criteria under ASC Topic 606. At the inception of the sale and leaseback, Klear should debit cash and credit
a. notes payable.
b. sales revenue.
c. lease liability.
d. the asset.
Answer:
Klear Manufacturing
At the inception of the sale and leaseback, Klear should debit cash and credit
c. lease liability.
Explanation:
a) Data and Calculations:
Debit Cash $1.4 million Lease Liability $1.4 million
Debit ROU asset $1.4 million Credit Plant $1.2 million Credit Gain from Sale $0.2 million
b) The sale and leaseback creates a right of use asset as well as a lease liability. Therefore, the Cash account is debited for the cash receipts from the transaction and the Lease Liability is credited. Also debited is the right of use asset with corresponding credits to the Asset account and Gain from Sale.
Radison Enterprises sells a product for $114 per unit. The variable cost is $63 per unit, while fixed costs are $741,285. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $120 per unit. a. Break-even point in sales units fill in the blank 1 units b. Break-even point if the selling price were increased to $120 per unit
Answer:
Results are below.
Explanation:
Giving the following information:
Selling price= $114
Unitary variable cost= $63
Fixed costs= $741,285
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 741,285 / (114 - 63)
Break-even point in units= 14,535
Now, the break-even point if the selling price is $120:
Break-even point in units= 741,285 / (120 - 63)
Break-even point in units= 13,005
A company has long-lived tangible assets with a cost of $3.5 million; its Accumulated Depreciation account has a balance of $1.1 million. Which of the following statements is correct?
A. The book value of long-lived assets is $2.4 million.
B. The market value of long-lived assets is $3.5 million.
C. The carrying value of long-lived assets is $3.5 million.
D. The resale value of long-lived assets is $2.4 million
Answer:
A. The book value of long-lived assets is $2.4 million.
Explanation:
Given data :
The cost of the long-lived tangible assets = $ 3.5 million
Amount of depreciation account = $ 1.1 million
Therefore, the book value of the long lived asset is defined as the cost of the asset minus the accumulated depreciation.
i.e., Book value = 3.5 - 1.1
= $ 2.5 million
Thus the correct option is option (A).
What is the difference between independent and dependent demand. Group of answer choices independent iemand is based on market forces while Dependent demand is based on production schedule dependent demand is what determines independent demand independent demand is based on dependent demand dependent demand is based on sales while independent demand is based on management decisions
Answer:
independent demand is based on market forces while Dependent demand is based on production schedule
Explanation:
Independent demand is the demand for a finished product bought by a consumer e.g. the demand for a textbook by a student
independent demand is based on market forces e.g. the price of the good
Consumers would be more willing to purchase a good that is cheaper compared to other goods
Dependent demand is the demand for the factors of productions that are needed in the production of the final good or service. e.g. the demand for labour , purchase of inventory needed to produce a good
If consumers do not demand for the finished product, there would be no demand for the inventory
Your company buys a computer system from IBM for $3 million and pays IBM $200,000 to install the computer system. The $3 million is on credit and your company pays $100,000 of interest on the loan in the current year. The acquisition cost of the computer system at the end of the current year will be
Answer:
$3.2 million
Explanation:
Calculation to determine what The acquisition cost of the computer system at the end of the current year will be
Using this formula
Acquisition cost=Purchase price+ Installation cost
Let plug in the morning
Acquisition cost= $3 million +$200,000
Acquisition cost=$3.2 million
Therefore The acquisition cost of the computer system at the end of the current year will be $3.2 million
You purchased an automobile a year ago for $10,000. Its current market price is $6,000, and the expected market value one year from now is $4,000. If the interest rate is 10 percent, how much will it cost you to keep the car for an additional year (over and above operation and maintenance costs)
Answer: $2600
Explanation:
From the information given, the cost price of the automobile is $10000 but the current market price is $6000. If the automobile is old now for $6000 and the money is kept in a bank for.one year at an interest rate of 10%, then the interest gotten on it will be:
= $6000 × 10% × 1
= $600
In a situation whereby the automobile is sold the following year, then the price will be $4,000 and I will get $4,000. Therefore, the cost for keeping the car for an additional year will then be:
= (Current price - Future price) + Interest amount
= ($6,000 - $4,000) + $600
= $2,600.
EFT, Inc. wants to empower and engage its employees. They have several teams consisting of highly skilled employees and no one person on these teams has a specifically assigned position. Instead, employees lead each other as the occasion arises, so there is no formal hierarchy or organizational chart. This type of leadership is known as
Answer: shared leadership
Explanation:
Shared leadership occurs when the employees in a company lead each in order to achieve a successful outcome.
In shared leadership, the team environment relies on a shared voice and purpose. In shared leadership, the human resources in the company are maximized by empowering the employee and then giving them an opportunity to take up leadership positions.
Shared leadership are most effective when organizations are utilizing teams to achieve organizational objectives.
How are investors taxed on stocks and mutual fund investments? Check all that apply.
Answer:
yes
Explanation:
Generally, yes, taxes must be paid on mutual fund earnings, also referred to as gains. Whenever you profit from the sale or exchange of mutual fund shares in a taxable investment account, you may be subject to capital gains tax on the transaction. You also may owe taxes if your mutual fund pays dividends. The amount of tax owed ultimately depends on the combined total of your gains and losses.
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
"Realizing a capital gain from one mutual fund doesn't guarantee that you'll owe taxes on that gain. Each dollar of capital loss potentially can offset a dollar of capital gain."
— Mitchell Drossman, head of National Wealth Strategies in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank
A closer look at the capital gains tax
Short-term capital gains are gains from the sale of capital assets held for 12 months or less and are taxed at ordinary income tax rates. Long-term capital gains are gains from the sale of capital assets held for more than 12 months and are currently subject to a federal long-term capital gains tax rate of up to 20%.
2021 Capital Gains Tax RatesFootnote 1
Short-term
Held for 12 months or less
Ordinary income tax rate
Long-term
Held for more than 12 months
0%, 15% or 20% depending on your taxable income
But a capital gain in one mutual fund doesn't guarantee that you'll owe taxes on that gain. Each dollar of capital loss potentially can offset a dollar of capital gain.
For example if, in the same tax year, you have $1,000 in long-term capital gains and $600 in long-term capital losses, you'll pay tax only on the net long-term capital gain of $400. If your capital losses exceed your capital gains for the tax year, you can use up to $3,000 of these excess capital losses to offset ordinary income in such tax year. You can carry over capital losses in excess of $3,000 to offset capital gains in future tax years (and, potentially, ordinary income of up to $3,000 per year).
On January 1, 2021, Legion Company sold $260,000 of 8% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $200,356, priced to yield 12%. Legion records interest at the effective rate. Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of:_____.
a. $15,600.
b. $7,800.
c. $31,200.
d. $10,232.
Answer:
$12,021
Explanation:
Calculation to determine what Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of:
Using this formula
Interest paid =[Bonds amount*(Priced to yield/2)]
Let plug in the formula
Interest paid = $200,356*( 12%/2)
Interest paid=$200,356*6%
Interest paid =$12,021
Therefore Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of:$12,021
The cost of capital is:___________
a. the return that a previous project for the firm had earned.
b. the minimum return that a capital budgeting project must earn for it to be accepted.
c. the maximum return a project can earn.
d. none of these.
Answer:
I think that the correct answer is b.
Answer:
B
Explanation:
i think the correct answer is B
Entries for Installment Note Transactions On the first day of the fiscal year, Shiller Company borrowed $63,000 by giving a five-year, 12% installment note to Soros Bank. The note requires annual payments of $17,773, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $7,560 and principal repayment of $10,213. Journalize the entries to record the following:
a. Issued the installment note for cash on the first day of the fiscal year.
b. Paid the first annual payment on the note. For a compound transaction, if an amount box does not require an entry, leave it blank.
c. Explain how the notes payable would be reported on the balance sheet at the end of the first year.
Answer:
Shiller Company
Journal Entries:
a) Jan. 1 Debit Cash $63,000
Credit 12% Note Payable (Soros Bank) $63,000
To record the issuance of the five-year, 12% installment note.
December 31: Debit Note Payable (Soros Bank) $10,213
Debit Interest Expense $7,560
Credit Cash $17,773
To record the first repayment, including interest.
c. The notes payable would be reported as Long-term Liability at $52,787.
Explanation:
a) Data and Analysis:
Jan. 1 Cash $63,000 12% Note Payable (Soros Bank) $63,000
Issuance of a five-year, 12% installment note.
December 31: Note Payable (Soros Bank) $10,213 Interest Expense $7,560 Cash $17,773
Balance of Notes Payable on December 31:
Amount of note = $63,000
Repayment = (10,213)
Balance of note = $52,787
Positive Messages and the Writing Process
Organizations exchange information internally and externally. External messages go to customers, vendors, the government, and other business partners. Internal messages travel upward to supervisors, downward to employees, and horizontally among workers. Understanding the different types of business messages and following the 3-x-3 writing process will help you write more effective professional messages. Match the message content area with the correct types of messages.
1. Sales pitches, requests for favors
2. Replies, goodwill messages, direct claims
3. Bad news, refusals
a. persuasive
b. positive
c. negative
Consider the scenario about a positive message:
Gilberto is composing an e-mail that explains the terms of a recent business transaction. He has determined the purpose of the message, analyzed his audience, and determined its reactions.
According to the 3-x-3 writing process, what actions make up his next steps?
a. Make a list of points to cover.
b. Plan for feedback.
c. Check for mechanical problems.
d. Collect information.
e. Compose the first draft.
While most business communication is now done electronically, there remain situations in which a business letter is most appropriate.
Messages delivered through business letters are less likely to reach_____than messages delivered through_____. Thus, business letters are more_____.
Answer: See explanation
Explanation:
1a. Sales pitches, requests for favors: In this case, persuasive message should be used to convince the receiver to agree with the sender's viewpoint.
b. Replies, goodwill messages, direct claims: The positive message should be used as the main idea can be communicated directly before any other supporting information are provided.
c. Bad news, refusals: This scenario involves a negative messages and should therefore be written in an indirect manner. It should also be noted that a supporting message us given before the main message us written.
2. According to the 3-x-3 writing process, the actions that make up Gilberto next steps include
a. Make a list of points to cover.
d. Collect information.
e. Compose the first draft.
3. Messages delivered through business letters are less likely to reach (unintended recipients) than messages delivered through (email). Thus, business letters are more (confidential).
As more units of an item are purchased, everything else equal, marginal satisfaction from consuming additional units will tend to Select one: a. decrease at the same rate for all consumers. b. decrease but at different rates for different people. c. increase at the same rate for all consumers. d. increase but at a decreasing rate for all consumers.
Answer:
b
Explanation:
Marginal satisfaction is the additional satisfaction received from consuming an additional unit of a good or service. It is the change in total satisfaction by increasing the quantity consumed by one unit
Marginal satisfaction usually declines as more units of the products is consumed
An example illustrating diminishing marginal satisfaction.
Imagine a traveller arriving from the desert where he hadn't had a drink of water in days .he is offered his first glass of water. the first cup of water he drinks would give him the highest utility. As more and more cups of water is drank, marginal utility decreases. At the point where he is fully satisfied, he stops drinking water and marginal utility becomes zero.
the decrease in marginal satisfaction of this traveller would be slower than the decrease in marginal satisfaction of a person working in an air conditioned office with easy assess to water
Lemon company purchased 100 units for $20 each on January 31. It purchased 200 units for $30 each on February 28. It sold 200 units for $50 each from March 1 through December 31. If the company uses the first-in, first-out inventory costing method, what is the amount of Cost of Goods Sold on the income statement for the year ending December 31?
A. $6,350.
B. $4,350.
C. $1,600.
D. $4,750.
Answer:
Find detailed explanations below
Explanation:
Under the first-in-first-out inventory valuation method, the earlier stocks are sold first and the latest stocks remain in inventory.
In essence, the 200 units sold comprise of 100 units purchased on January 31 at $20 each and 100 units from purchases made on February 28 at $30 each as computed below
Cost of goods sold=(100*$20)+(100*$30)
Cost of goods sold=$5,000(the options are wrong)
The correct question for the options is provided below:
A company purchased 80 units for $20 each on January 31. It purchased 190 units for $25 each on February 28. It sold 190 units for $80 each from March 1 through December 31. If the company uses the first-in, first-out inventory costing method, what is the amount of Cost of Goods Sold on the income statement for the year ending December 31? (Assume that the company uses a perpetual inventory system.)
A.
$6,350
B.
$4,350
C.
$1,600
D.
$4,750
Cost of goods sold=(80*$20)+(110*$25)
Cost of goods sold=$4,350
Example Payback period of a new machine Let’s say that the owner of Perfect Images Salon is considering the purchase of a new tanning bed. It costs $10,000 and is likely to bring in after-tax cash inflows of $4,000 in the first year, $4,500 in the second year, $10,000 in the 3rd year, and $8,000 in the 4th The firm has a policy of buying equipment only if the payback period is 2 years or less. Calculate the payback period of the tanning bed and state whether the owner would buy it or not. Calculate the discounted payback period of the tanning bed, stated in Example 1 above, by using a discount rate of 10%.
Answer:
Payback PeriodPayback period = Year before payback + Amount left to be paid back / Cashflow in year of payback
In year 2, the bed would have paid back:
= 4,000 + 4,500
= $8,500
Would be left with:
= 10,000 - 8,500
= $1,500
Payback period = 2 + 1,500 / 10,000
= 2.15 years
Company will not buy as payback period is more than 2 years.
Discounted payback period.Discount the cashflows first:
Year 1 = 4.000 / 1.1 = $3,636.36
Year 2 = 4,500 / 1.1² = $3,719
Year 3 = 10,000 / 1.1³ = $7,513.15
Year 4 = 8,000 / 1.1⁴ = $5,464.11
Discounted payback period = Year before payback + Amount left to be paid back / Cashflow in year of payback
= 2 + (10,000 - 3,636.36 - 3,719) / 7,513.15
= 2 + 2,644.64 / 7,513.15
= 2.35 years
Which of the following approaches for calculating the market value of a property involves estimating the dollar value associated with replacing the property new, as well as determining the loss in value due to physical, functional, and external obsolescence?
a. income approach
b. sales comparison approach
c. cost approach
d. Investment approach
Answer:
c. cost approach
Explanation:
The cost approach is a real estate valuation method in which the price estimated regarding the buyer that have to pay for the property and the same is equivalnet to the cost for creating a buidling.
Here the property value should be equivalent to the land cost also add the construction cost and minus the depreciation expense
So as per the given situation, it is the cost approach that determined the market value of the property
Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2015, an auction house sold a painting for a price of $1,080,000. Unfortunately for the previous owner, he had purchased it three years earlier at a price of $1,660,000.
What was his annual rate of return on this painting? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer: -13.35%
Explanation:
Based on the information given in the question, the annual rate of return on this painting will be calculated thus:
Sales price of painting = $1,080,000
Cost price of painting = $1,660,000
The sales Price formula is given as
= Cost price × (1 +r)³
1080000 = 1660000 × (1+r)³
1,080,000/1,660,000 = (1+r)³
0.65 = (1 + r)³
Annual rate of return r will now be:
= 0.6506^⅓ - 1
= -13.35%
