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Deer Valley Lodge, a ski area near Salt Lake City, has plans to eventually add five new chairlifts. Suppose that one of the lifts costs $2.2 million and preparing the slope and installing the lift cost another $1.48 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the lodge needs the extra capacity. (Assume Deer Valley will sell all 300 lift tickets on those 40 days). Running the new lift will cost $500 a day for the entire 200 days the lodge is open. Assume that lift tickets at Deer Valley cost $65 a day and added cash expenses for each skier day are $9. The new lift has an economic life of 20 years.
1) Assume that the before tax required rate of return for Deer Valley is 14%. Compute the before tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment.
2) Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, advise the managers of Deer Valley about whether adding the lift will be profitable investment.
3) What subjective factors would affect the investment decision?
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During 2013, Rachel Parkins, president of Mathieson Company, was paid a semimonthly salary of $6,800. Compute the amount of FICA taxes that should be withheld from her:
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Which of the following is an example of a variable cost?
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Glenda received a proportionate nonliquidating distribution from the EFG Partnership. The distribution consisted of $10,000 cash and property with an adjusted basis to the partnership of $34,000 and a fair market value of $42,000.
What would be the effect of this purchase on income before income taxes? (Leave no cells blank - be certain to select "No effect" wherever required. Omit the "tiny_mce_markerquot; sign in your response.)
On December 1, 2010, the company declared a cash dividend of $2 per share which will be paid in cash on January 15, 2011. The annual accounting period ends December 31. Prepare the appropriate journal entries on each date.
Alamo Inc. had $300 million in taxable income for the current year. Alamo also had a decrease in deferred tax assets of $30 million and an increase in deferred tax liabilities of $60 million.
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The infrastructure has a basis of $400 million and would be depreciated over a 40 year life, if depreciation were charged. The amount that would be shown as expense in the Statement of Activities would be:
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