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Capitalizing vs. expensing - effect on ROI and operating income.
During the first month of its current fiscal year, Away Co. incurred repair costs of $20,000 on a machine that had five years of remaining depreciable life. The repair cost was inappropriately capitalized. Away Co. reported operating income of $160,000 for the current year.
A. Assuming that Away Co. took a full year's straight-line depreciation expense in the current year, calculate the operating income that should have been reported for the current year.
B. Assume that Away Co.'s total assets at the end of the prior year and at the end of the current year were $940,000 and $1,020,000 respectively. Calculate ROI (based on operating income) for the current year using the originally reported data and then using the corrected data.
C. Explain th effect on ROI of subsequent years if the error is not corrected.
What is present value of $2,500 to be received at the beginning of each of 30 periods, discounted at 10% compound interest?
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We want to price options using the binomial lattice. The current stock price is 54 and the strike price is 50. Assume that the stock up-trend rate is u = 1.2 with probability p = 0.4 and the down-trend rate is d = 0.8 with probability 1 − p = 0.6. Co..
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In making an ethical decision, which step entails exploring your own personal beliefs and how it can affect your opinion?
Schalpfer Inc. is trying to determine whether to give a $15 rebate, to cut the price to $8, or to have no price change on a software networking product. Currently, 40,000 units of the product are sold each week for $45. The variable cost of the produ..
How many shares of common stock are outstanding and assuming that all shares were sold at the same price, what was the original selling price per share?
In February, one of the processing departments at Whisenhunt Corporation had beginning work in process inventory of $38,000 and ending work in process inventory of $16,000. During the month, the cost of units transferred out from the department was $..
In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued?
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