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Question
A firm believes it can generate an additional $250,000 per year in revenues for the next 5 years if it replaces existing equipment that is no longer usable with new equipment that costs $240,000. The firm expects to be able to sell the new equipment when it is finished using it (after 5 years) for $10,000. The existing equipment has a book value of $20,000 and a market value of $12,000. Variable costs are expected to total 70% of revenue. The additional sales will require an initial investment in net working capital of $15,000, which is expected to be recovered at the end of the project (after 5 years). Assume the firm uses straight line depreciation, its marginal tax rate is 30%, and its weighted-average cost of capital is 10%.
a) How much value will this new equipment create for the firm?
b) At what discount rate will this project break even?
c) Should the firm purchase the new equipment?
Alder Company budgets an annual basis. The following beginning and ending inventory levels (in units) are planned for the next year. Two units of raw material are required to produce each of finished products.
Evaluate the comment by the accountant of HAR in respect of the deductibility of expenses and outgoings under Hong Kong salaries tax and profits tax.
You are well aware of the importance of budgeting in managing a business enterprise successfully. Consequently, you have decided to prepare an operating budget for the Banner Company for the year 2013.
Why might managers find out a flexible budget analysis more informative than the strategic-budget analysis? Describe your rationale. How might a manager gain insight in the causes of the flexible-budget variance for direct materials?
AGL has published an annual sustainability report since 2004 to communicate sustainability performance in the areas of customers, community, people, economic, climate change and environment.
Hampstead company's order entry department has 20 order entry operators. The cost associated with these 20 operators (salaries, fringe benefits, and supervision, as well as occupancy and equipment costs) is $873,600 per year.
Explain any opportunity, sunk, out-of-pocket, and/or relevant costs that figured in Rosley's decision. How did Rosley compute the $400 per month savings?
Discuss how a budget could help you personally or your organization accomplish the objectives of long range plan developed for you personally or for your organization.
Read Using Shareholder Value to Evaluate Strategic Choices - The basic principle of the article is that performance evaluation based on accounting measures alone is not sufficient.
Compare and contrast various cost classifications, behaviors, and drivers. You may want to consider what types of financial and nonfinancial performance metrics you will be recommending to be sure we are collecting appropriate costs
Determine the number of whole units to be accounted for and to be assigned costs and the equivalent units of production for the Drawing Department.
A master budget is the compilation of forecasts for coming year or operating cycle made of many departments or function in an organization. What is the most significant forecast made in the master budget? Mention the reasons for your answer.
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