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Home Inc. is considering buying a new piece of equipment, which will cost $715,000 and has an economic life of 5 years, in order to make a new line of product. The company supposes they can sell 25,000 units of this new product per year at $130 per unit in every of next 5 years. The unit variable cost is $110 and total fixed costs (excluding CCA) are $195,000 per year.The CCA rate for the new equipment is 30% and Home Inc. is going to claim the maximum CCA in every of the next 5 years.Home Inc. Requires to invest $140,000 in net working capital up front which will be fully recovered at the end of 5 years.The equipment is estimated to be sold at its UCC value at the end of 5 years.The discount rate is 15% and the tax rate is 35%.Requirements: Show your calculationa. Measure the CCA allowance and ending UCC in each of the 5 years. b. Measure the net income and operating cash flow of this new product for each of the 5 years. c. Measure the initial investment outlay. d. Measure the PV of tax shield on CCA. e. Verify whether Home Inc. should invest in the new equipment using NPV as the evaluation method.
At current the working capital cycle is Receivables days $0.4m/$10m * 365 = 15 days Inventory days $0.7m/$8m * 365 = 32 days (cost of sales = $10m - $2m) Payables days $1.
Broadway Scripts is a service-type enterprise in the entertainment field, and its manager, Joe Numbers, has only a limited knowledge of accounting. Joe prepared the following balan
economic substance as in recognition of revenue
Q. Which of the following is not true of a corporation? a. It may buy, own, and sell property. b. It may sue and be sued. c. The acts of its owners bind the corporation. d. It may
1. Prepare three years of monthly cash budgets, yearly income statements, and yearly balance sheets for the jewelry business Daisy & Company. General Information: 1. Th
Great Pumpkin Farms just paid a dividend of $3.50 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors need a 16 per
Day Corporation purchased a patent on January 1, 2012 for $360,000. The patent had a useful life of 10 years at that date. In January of 2013, Day successfully defends the patent a
Using CAPM's formula, Return on equity = Risk-free rate + Beta*(Expected market return - risk-free rate) With the given information, Return on equity = 1% + 0.55*(8% - 1%)
Refer to Figure, using the Mason's gain formula, determine the transfer function of the system.
Cost of goods sold minus sales
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