### Compute the average price indexes for january 2010

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##### Reference no: EM13157684

Question 1: At the beginning of the fiscal year, Borland company acquired new equipment at a cost of \$65,000. The equipment has an estimated life of five years and an estimated salvage value of \$5,000.

A. Using the Straight-line method, determine the annual depreciation for each of the five years of estimated useful life of the equipment, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year.

B. Using the Declining-balance method, determine the annual depreciation for each of the five years of estimated useful life of the equipment, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year.

Question 2: The following data indicate the average retail prices for regular unleaded gasoline (in cents) at self-service filling stations, by major urban centres in Ontario:

A. Assuming that the base period (price index = 100) is January 2009, compute the average price indexes for January 2010 for all three centre.
B. Assuming the value for Toronto in January 2009 is the base period index, compute the newly re-indexed values for the entire table.

Question 3: On her 23rd birthday, a young engineer decides to start saving toward building up a retirement fund that pays 8% interest compounded quarterly (the market interest rate). She feels that \$600,000 worth of purchasing power in today's dollars will be adequate to see her through her sunset years after her 63rd birthday. Assume a general inflation rate of 6% per year:

A. If she plans to save by making 160 equal quarterly deposits, what should be the amount of her quarterly deposits in actual dollars? Support your answer with all necessary steps

B. If she plans to save by making end-of-the-year deposits, increasing by \$1000 over each subsequent year, how much would her first deposit be in actual dollars? Support your answer with all necessary steps

Question 4: Consider the following financial data for a project:

The initial investment will be financed with 70% equity and 30% debt. The before tax debt interest rate, which combines both short-term and long-term financing, is 10%, with the loan to be repaid in equal annual installments over the project life. The equity interest rate (ie), which combines the two sources of common and preferred stock, is 15%. The firm's marginal income tax rate is 35%.

A. Compare the alternatives, using ie
B. Compare the alternatives, using k. Which alternative should be selected? Support your answer with all necessary steps

= 15%. Which alternative should be selected? Support your answer with all necessary steps

C. Compare the results obtained in (A) and (B)? Support your answer with all necessary steps

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