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Pine & Oak have spent €20,000 researching the prospects for a new range of products. If it were decided that production is to go ahead an investment of €240,000 in capital equipment will be required. The accounts department has produced budgeted profit and loss statements for each of the next five years for the project. At the end of Year 5 the capital equipment will be sold and production will cease. The capital equipment is expected to be sold for scrap at the end of Year 5 for €40,000. Projected Profit/loss (in €000s) Year 1 Year 2 Year 3 Year 4 Year 5 Sales 400 400 400 320 200 Materials 240 240 240 192 120 Other variable costs 40 40 40 32 20 Overheads 20 20 24 24 24 Depreciation 40 40 40 40 40 Net profit/(loss) 60 60 56 32 (4) When production start it will be necessary to raise material stock levels by €30,000 and other working capital by €20,000. Both the additional stock and other working capital increases will be released at the end of the project. Customers receive one year's credit from the company. The overhead figures in the budgeted accounts have two elements - 60% is due to a reallocation of existing overheads, 40% is directly incurred because of the take-up of the project. For the purposes of this appraisal, regard all receipts and payments as occurring at the end of the year to which they relate. The company's cost of capital is 12%. Ignore inflation or tax. Appraise the project using NPV approach. Should the company go ahead? Why or why not?
Great Falls Brewery's regular selling price for a case of beer is $15. Variable costs are $8 per case and fixed costs total $2 per case based on production of 250,000 cases.
State how the concept of "professionalism" in the public accounting industry shifted or evolved between Federal Trade Commission's "restraint of trade" decision in the early 1970s and today, several years following passage of the Sarbanes-Oxley Ac..
Prepare an analysis and determine which plan will result in the higher earnings per share of common stock. Recommend one plan to the board. Give reason
Determination of Beneficiary's Income. A trust is authorized to make discretionary distributions of income and principal to its two beneficiaries, Roy and Sandy.
Smith Company's break-even point is 12,200 units. Each unit generates variable costs of $2.20 and is sold for $4.90. What are the total fixed costs?
Prepare the journal entry to record the bond issuance by Ryan on January 1, 2011.
Under what circumstances would you not want to normalize a table? Finally, do you feel the advantages of normalization outweigh the disadvantages?
Assuming the only changes in retained earnings in 2009 were for net income and a $25,000 dividend, what was net income for 2009?
Randolph's basis in RD is $37,000. What is Randolph's basis in the distributed inventory and land?
The 2008 annual report for Fortune Brands, the seller of Pinnacle golf balls and MasterLock padlocks,disclosed that 750 million shares of common stock have been authorized.
Parent sold land to its subsidiary for a gain in 2007. The subsidiary sold the land externally for a gain in 2010. Which of the following statements is true?
In the consolidated income statement of Push Company and its subsidiary, Shove Corporation, the noncontrolling interest was assigned $24,000 of income for 2009. What amount of net income did Shove report for 2009 if Push owns 80 percent of Shove?
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