Chapter 12 Analyzing Project Cash Flows 12-1. Captain’s Cereal’s new Crunch Stuff n’ Stars is expected to generate $25M in sales. However‚ 20% of that will be cannibalized from the original cereal‚ Crunch Stuff. Thus‚ the sales amount that should be allocated to the new Stars version is only (100% − 20%) of the $25M‚ or $20M. This is an example of finding an “incremental” cash flow. As shown in equation 12-1‚ we only want to consider what is different if we go ahead with the project: incremental
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The time an asset is expected to last is called its a. depreciation. b. fiscal period. c. net loss value. d. useful life. ANS: D DIF: Easy OBJ: LO 5-1 MSC: AACSB Communication 6. Matching the cost of an asset with the revenue it is expected to produce is called a. adjusting. b. expensing. c. depreciation. d. contra-valuing. ANS: C DIF: Easy OBJ: LO 5-1 MSC: AACSB Communication 7. The cost of an asset that is subject to depreciation is called a. salvage value. b. depreciable cost. c. revenue
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Chart Year 1 2 3 4 5 Sales Volume 1400 1525 1730 1650 1420 Sales Revenue 8.680 9.455 10.726 10.230 8.804 Variable Costs 3.906 4.255 4.827 4.604 3.962 Fixed Costs 2.1 2.1 2.1 2.1 2.1 Total Costs 6.006 6.355 6.927 6.704 6.062 Depreciation Case 1 1.343 2.302 1.644 Depreciation Case 2 1.343 2.302 1.644 1.174 0.839 (The unit of the price is million) Step 1 In this case‚ it seems to be an important decision for XYZ Bicycle Co. Ltd to determine whether to introduce the new mountain bike.
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Balls and Bats‚ Inc. made a purchase of equipment. The cost of the equipment was one hundred thousand dollars and had life expectancy of four years. The following schedules are the double-declining balance method and the straight line method of depreciation. This schedule will assist Balls and Bats‚ Inc determine the best method to depreciate there new acquisition. Further‚ the schedules will determine which will glean a higher net income for the organization for the year ending December 31‚ 2005
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the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years? a. In the case of depreciation of some type of assets‚ Harnischfeger is adjusting its depreciation policy to the straight-line method from accelerated methods‚ which let the company increased net income as the adjustments are being applied retroactively. This change will increase net income in the coming immediate years‚ but the depreciation expense will be
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A Case Study on Pressco‚ Inc. (1985) Submitted by: Cherry Ann Abangtao Maricor Quilnat Hyacinth Mae Yarcia Jan Joseph Tayzon 4BSA Financial Management II History Jane Rogers‚ a marketing representative of Pressco Inc.‚ was attempting to sell mechanical drying equipments to Paperco but was unsuccessful in her efforts. However‚ in November 1985 new tax legislation had been rumored that gained the interest of Paperco to buy new equipments. This gave Jane Rogers the
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ACCT1A Sample Exam 3 Name: __________________________ Date: _____________ 1. The maturity date of a note receivable: A) Is the day of the credit sale. B) Is the day the note was signed. C) Is the day the note is due to be paid. D) Is the date of the first payment. E) Is the last day of the month. 2. The amount of bad debt expense can be estimated by: A) The percent of sales method. B) The percent of accounts receivable method. C) The aging of accounts receivable method. D) Only b and c. E)
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1. Calculate the annual depreciation expense that Delta and Singapore would record for each $100 gross value of aircraft. Depreciation=(original value-residue value)/estimated used year a) For Delta‚ what was its annual depreciation expense (per $100 of gross aircraft value) prior to July 1‚ 1986; from July 1‚ 1986 through March 31‚ 1993; and from April 1‚ 1993 on? Annual depreciation expenses each $100 gross value of aircraft: Before July 1‚ 1986: (100-100x10%)÷10=9$
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References: [1] Using Depreciation Tables‚ Tax Tips and Resources. Retrieved July 23‚ 2005 from www.turbotax.com/articles/UsingDepreciationTables.html [2] O’Neill‚ Sensei Ken‚ The Home Gym Frontier‚ Dolfzine Online Fitness‚ Retrieved July 23‚ 2005 from http://www.dolfzine.com/page689
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Wk-4; Q1: A firm uses a single discount rate to compute the NPV of all its potential capital budgeting projects‚ even though the projects have a wide range of nondiversifiable risk. The firm then undertakes all those projects that appear to have positive NPVs. Briefly explain why such a firm would tend to become riskier over time. Let’s start with some definitions and simple examples according to authors‚ Emery‚ Finnerty and Stowe: “Time Value of Money: The value that a capital budgeting project
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