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accounting problems with all solutions




Question;Briarcrest Condiments is a spice-making firm. Recently, it;developed a new process for producing spices. The process requires new;machinery that would cost $2,018,842. have a life of five years, and would;produce the cash flows shown in the following table.;Year Cash Flow;1 $628,269;2 -257,414;3 894,873;4 892,460;5 693,614;What is the NPV if the discount rate is 16.88 percent?;2. Archer Daniels Midland Company is considering buying a;new farm that it plans to operate for 10 years. The farm will require an;initial investment of $12.20 million. This investment will consist of $2.90;million for land and $9.30 million for trucks and other equipment. The land;all trucks, and all other equipment is expected to be sold at the end of 10;years at a price of $5.29 million, $2.02 million above book value. The farm is;expected to produce revenue of $2.02 million each year, and annual cash flow;from operations equals $1.82 million. The marginal tax rate is 35 percent, and;the appropriate discount rate is 10 percent. Calculate the NPV of this;investment.;3. Bell Mountain Vineyards is considering updating its;current manual accounting system with a high-end electronic system. While the;new accounting system would save the company money, the cost of the system;continues to decline. The Bell Mountain?s opportunity cost of capital is 12.6;percent, and the costs and values of investments made at different times in the;future are as follows;Year Cost Value of Future Savings;(at time of purchase);0 $5,000 $7,000;1 4,400 7,000;2 3,800 7,000;3 3,200 7,000;4 2,600 7,000;5 2,000 7,000;Calculate the NPV of each choice. (Round answers to the;nearest whole dollar, e.g. 5,275.);The NPV of each choice is;NPV0 = $;NPV1 = $;NPV2 = $;NPV3 = $;NPV4 = $;NPV5 = $;Suggest when should Bell Mountain buy the new accounting;system?;Bell Mountain should purchase the system in;4. Chip?s Home Brew Whiskey management forecasts that if the;firm sells each bottle of Snake-Bite for $20, then the demand for the product;will be 15,000 bottles per year, whereas sales will be 84 percent as high if;the price is raised 7 percent. Chip?s variable cost per bottle is $10, and the;total fixed cash cost for the year is $100,000. Depreciation and amortization;charges are $20,000, and the firm has a 30 percent marginal tax rate.;Management anticipates an increased working capital need of $3,000 for the;year. What will be the effect of the price increase on the firm?s FCF for the;year? (Round answers to nearest whole dollar, e.g. 5,275.);At $20 per bottle the Chip?s FCF is $ and at the new price;Chip?s FCF is $.;5. Capital Co. has a capital structure, based on current;market values, that consists of 33 percent debt, 12 percent preferred stock;and 55 percent common stock. If the returns required by investors are 11;percent, 12 percent, and 15 percent for the debt, preferred stock, and common;stock, respectively, what is Capital?s after-tax WACC? Assume that the firm?s;marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal;places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.);After tax WACC = %


Paper#42185 | Written in 18-Jul-2015

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