3. How would the firm determine the cost effectiveness of purchasing the long term assets used by the firm over an extended period of time?
4. Under what criteria would the management determine the risk and return of the purchase of long term capital assets to assure that the firm's long term value is increased?
Ans3 -- A firm can make an analysis whether the existing asset is working on full potential capacity or not. If yes then the asset is working on an cost effective manner. But if there is need to repair the asset then the duty of firm is to analyse and make a decision whether to purchase the asset or take it on lease. This is because that there may be situations when the repairing cost can not make the asset to work on full potential capacity. These all are needed to provide the way to firm to move towards an cosy effective way.
3. How would the firm determine the cost effectiveness of purchasing the long term assets used...
The General Capital Assets and General Long-Term Liabilities non-fund accounts would be used to account for a) All capital assets acquired by a government entity regardless of the type of fund purchasing the asset. b) Capital assets acquired with governmental fund resources that will be used in governmental fund activities. c) Capital assets acquired with debt proceeds only. d) Capital assets that are used by a variety of governmental and proprietary funds.
Under ASPE The historical cost of long-term assets Select one: a. Becomes larger over the life of the asset b. Becomes smaller over the life of the asset c. Remains unchanged from the time they are purchased to the time they are sold d. Is irrelevant when recording purchases of capital assets
Capital Budgeting Case This case is about the purchase of long-term operational assets which called capital investments. Investment in capital assets normally can be covered only by using those assets Once a company purchases a capital asset, it is committed to that investment for an extended period of time. Business profitability ultimately hinges, to a large extent, on the quality of a few key capital investment decisions. A capital investment decision is essentially a decision to exchange current cash outflows...
chicago corporation, which uses the allowance method Recognizing and Classifying the Cost of Long-Term Assets E2A. CONCEPT Fraser Manufacturing purchased land next to its factory to be used as a parking lot. The following expenditures were incurred by the company: purchase price, $300,000; broker's fees, $24,000; title search and other fees, $2,200; demoli- tion of a cottage on the property, $8,000; general grading of property, $4,200; paving parking lots, $40,000; lighting for parking lots, $32,000; and signs for parking lots,...
Only say choice 8. In order to maximize firm value, management should invest in new assets when the internal rate of retum a. greater or equal to the firm's marginal cost of capital. b. greater than the cost of debt financing. c. less than or equal to the accounting rate of return. 9. The cost of capital is: a. the opportunity cost of using funds to invest in new projects. b. the rate of return the firm must ean on...
Homework #4 Cost of Capital 2. Vo = So + Bo, where V. is the firm value in period 0, S, is the stockholder's equity in period 0, and B, is the value of the firm's debt in period 0. The same notations apply to the firm value in period 1, V1, and the firm's equity, S1, and debt, B1 A. (5 points) Vo = $100, V1 = $110, what is the rate of return for the firm from period...
determine how the firm is financing investment in assets: long-term debt, preferred stock, and common stock This question is based on Estee Lauder 2018 balance sheet
2. The management of Nixon Corporation is investigating purchasing equipment that would cost $536,000 and have a 7 year life with no salvage value. The equipment would allow an expansion of capacity that would increase sales revenues by $373,000 per year and cash operating expenses by $215,500 per year. (Ignore income taxes.) Required: Determine the simple rate of return on the investment. (Round your answer to 1 decimal place.) Simple rate of return The management of Truelove Corporation is considering...
CURRENT ASSETS INVESTMENT POLICY Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $2 million as a result of an asset expansion presently being undertaken. Fixed assets total $2 million, and the firm plans to maintain a 40% debt-to-assets ratio. Rentz's interest rate is currently 10% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level...
CURRENT ASSETS INVESTMENT POLICY Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $2 million as a result of an asset expansion presently being undertaken. Fixed assets total $1 million, and the firm plans to maintain a 40% debt-to-assets ratio. Rentz's interest rate is currently 8% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level...