ECO 1192A Blue Assignment C.Thoret Fall 2013-A town is studying the purchase of one of three mutually exclusive
Question;ECO 1192ABlue AssignmentC.ThoretFall 2013A.Assignment Instructions1.7.8.Consult the Excel assignment allocation file on Virtual Campus for yourassignment.You will get a zero score for completing a different assignment.You require a BLUE Scantron for the answers to a BLUE assignment.The colour of your Scantron is identified by a Highlighter mark in itsupper right-hand corner.The Course Code on the Scantron answer sheet for this assignment isECO1192AB. Do not forget to darken the appropriate ovals.Answer sheetswill be distributed by the instructor at the November 26th lectureare to be submitted at 7 pm at the December 3rd lecture.Each assignment is worth 10% of the overall course grade.Late Scantron sheets will most definitely be rejected.B.Problems and Questions22.214.171.124.6.QUESTIONS 1 to 7A town is studying the purchase of one of three mutually exclusive truckmodels. Their estimated cash flows and other information are provided inthis Table.Truck Model InformationProject ParametersABC1. Initial Cost$22,00026,20017,0001|Page2. Annual revenues3. Annual costs4. End-of-life salvagevalue5. Useful life$14,000$7,000$4,0004 yearsMARR = 10%15,0007,5005,00012,0005,8003,5001051.The NPW of truck A to the nearest $100 isa) $2900, b) $8700, c) $22800, d) $30200, e) None of these answers.2.The NPW of truck B to the nearest $100 isa) $2900, b) $8700, c) $22800, d) $30200, e) None of these answers.3.The NPW of truck C to the nearest $100 isa) $2900, b) $8700, c) $22800, d) $30200, e) None of these answers.4.The best truck model isa) A, b) B, c) C, d) None of these answers.5.The recovery period (in years to 2 decimals) of truck A based on thediscounted payback method isa) 3.96, b) 4.50, c) 3.73, d) None of these answers.6.The recovery period (in years to 2 decimals) of truck B based on thediscounted payback method isa) 4.2, b) 4.50, c) 4.75, d) None of these answers.7.The recovery period (in years to 2 decimals) of truck C based on thediscounted payback method isa) 2.35, b) 2.92, c) 3.16, d) None of these answers.].Questions 8 and 9Project information is shown this Table whereo All projects are independent of one another,o MARR = 10%,o Project salvage values are negligible.Selecting Projects With Capital RationingProjectsABCFirst Cost$15,00025,00010,000Life6 years86Net annual cash flows$5,7007,2002,800DE25,00040,0004128,1008,2008.Which entire project (s) is (are) best if capital limitation is $30,000?a) A, b) B, A&B, c) A&&B&D;d) A&&C&D&E;e) None of these answers.9.Which entire project (s) is (are) best if capital limitation is $60,000?a) A, b) B, A&B, c) A&&B&D;d) A&&C&D&E;e) None of these answers.QUESTIONS 10 to 32You are considering the purchase of a ceramic retail business. Additionalinformation on this potential investment includes:1.2.Planned ownership of 4 years.Rental revenues before taxes of $500,000 in year 1 growingthereafter at an annual rate of 1%.3. Annual expenses of $200,000 in year 1 growing thereafter at anannual inflation rate of 2%.4. Todays asking price for the building is $2 million (now) with anexpected selling price of $2.5 million after 4 years.5. The Canadian income tax rate on this type of investment is assumedto be 50% (on net annual revenues, capital gains or losses, and onrecaptured depreciation).6. Buildings and equipment are to be depreciated using the DB methodand a 20% depreciation rate.7. The half-year rule applies to the depreciation of the building.8. Working capital = $0.9. You are required to get a loan of $1.500,000 at a 10% rate.10. Repayment of the loan:End-of-year 1 (EOY1) =10%EOY2 = 30%EOY3 = 30%EOY4 = 30%11. MARRs areBefore-taxes with inflation = 20%Before-taxes without inflation (inflation-free) = 19%After-taxes with inflation = 10%After-taxes without inflation (inflation free) = 9%BTCF = Before-Tax Cash Flow, ATCF = After-Tax Cash Flow, CFOE = Cash Flow on Owner Equity0Annual revenues (AR) (Actual $)Annual costs (AC) (Actual $)1. BTCF "Operations" (Actual $)2. BTCF "SV" (Actual $)3. BTCF "Working Capital" (Actual $)4. Total BTCF (Actual $)5. BTCF "Operations" (Constant $)6. BTCF "SV" (Constant $)7. BTCF "Working Capital" (Constant $)8. Total BTCF (Constant $)9. Annual Depreciation10. Interest on loan11. Taxable Operating Income12. Taxes on Operating Income13. Capital gains14. Taxes on capital gains15. Recaptured depreciation16. Taxes on recaptured dep.17. ATCF "Operations" (Actual $)18. ATCF "Operations" (Constant $)19. ATCF "SV" (Actual $)20. ATCF "SV" (Constant $)21. ATCF "Working Capital" (Actual $)22. ATCF "Working Capital" (Constant $)1END OF YEAR23AA4BBCCDDEEFFGGHHIIJJKKLLMMNN4|Page023. Total ATCF (Actual $)24. Total ATCF (Constant $)25. (=R10.) Interest on loan26. Loan repayment27. CFOE (Actual $)28. CFOE (Constant $)PP1END OF YEAR23OOQQRRSSTTUU410.The dollar amount of cell AA (nearest $1000) isa) $310,000 b) $345,000, c) $380,000, d) None of these answers.11.The dollar amount of cell BB (nearest $1000) isa) $310.000, b) $312,000, c) $313,000, d) $318,000, e) None of theseanswers.12.The dollar amount of cell CC (nearest $1000 dollars) isa) $1,750,000, b) $2,200,000, c) $2,500,000, d) $3,500,000.13.The dollar amount of cell DD (nearest $100) isa) $310,200, b) $311,000, c) $311,100, d) $318,000, e) None of theseanswers.14.The dollar amount of cell EE (nearest $100) isa) $279,300, b) $288,400, c) $289,200, d) $289,400, e) None of theseanswers.15.The dollar amount of cell FF (nearest $1000) isa) $2,310,000, b) $3,760,000, c) $4,161,000, d) $5,120,000, e) None ofthese answers.16.The dollar amount of cell GG (nearest $1000) isa) $200,000, b) $225,000, c) $260,000, d) $265,000, e) None of theseanswers.17.The dollar amount of cell HH (nearest $1000) isa) $239,000, b) $276,000, c) $286,000, d) $288,000, e) None of theseanswers.18.The dollar amount of cell II (nearest $1000) isa) $125,000, b) $135,000, c) $145,000, d) $160,000, e) None of theseanswers.19.The dollar amount of cell JJ (nearest $100) isa) -$23,400, b) $13,400, c) -$32,900, d) $18,300, e) None of theseanswers.20.The dollar amount of cell KK (nearest $1000) isa) $500,000, b) $525,000, c) $675,000, d) $750,000, e) None of theseanswers.21.The dollar amount of cell LL (nearest $1000) isa) $910,000, b) $920,000, c) $922,000, d) $932,000, e) None of theseanswers.6|Page22.The dollar amount of cell MM (nearest $1000) isa) $452,000, b) $458,000 c) $460,000, d) $461,00023.The dollar amount of cell NN (nearest $1000) isa) $335,000, b) $340,000, c) $345,000, d) $365,000, e) None of theseanswers.24.The dollar amount of cell OO (nearest $1000) isa) $395,000, b) $400,000, c) $401,000, d) $403,000.25.The dollar amount of cell PP isa) -$1M, b) -$1.5M, c) -$2M, d) -$2.5M.26.The dollar amount of cell QQ (nearest $1000) isa) $378,000, b) $380,000, c) $384,000, d) $387,000.27.The dollar amount of cell RR (nearest $1000) isa) $0, b) $155,000, c) $160,000, d) $176,000.28.The dollar amount of cell SS (nearest $1000) isa) $430,000, b) $450,000, c) $475,000, d) $485,00029.The dollar amount of cell TT isa) -$0.5M, b) -$1.0M, c) -$1.5M, d) -2.0M.30.The dollar amount of cell UU isa) -$0.5M, b) -$1.0M, c) -$1.5M, d) -2.0M.31.The MARR required for the calculation of the Net Present Worth of theBefore-Tax Cash Flow (BTCF) in current dollars isa) 20%, b) 19%, c) 10%, d) 9%.32.The MARR required for the calculation of the Net Present Worth of theAfter-Tax Cash Flow (ATCF) in constant dollars isa) 20%, b) 19%, c) 10%, d) 9%.
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