Milton Industries wants to purchase new equipment that has a quoted price of $1,000,000. Milton estimates an additional cost of $85,000 will be needed today to have the equipment modified, shipped, and installed. The purchase of this additional equipment will require Milton to invest an estimated $55,000 in net working capital upfront, and this investment should be recovered when Milton sells the equipment. If purchased, the equipment will be employed for a total of five years, and then sold for an estimated $640,000. The equipment will be depreciated straight-line on a five-year schedule. During each of the years that the equipment is in service, it is expected to boost Milton’s sales revenue by $298,000 though annual operating costs (other than depreciation) are also expected to be higher, to the extent of $74,000. Milton faces a marginal tax rate of 25%, and its cost of capital is 7.25%. The amount of initial (time 0) outflow of cash for this project is expected to be:
$1,120,000
$1,140,000
$1,160,000
$1,170,000
$1,150,000
Initial outflow = Cost + installation cost + increase in NWC
Initial outflow = 1,000,000 + 85,000 + 55,000
Initial outflow = $1,140,000
Milton Industries wants to purchase new equipment that has a quoted price of $1,000,000. Milton estimates...
The Bistro is planning to add a new line of noodles that will require the acquisition of new processing equipment. The equipment will cost $1,000,000, including installation and shipping. It will be depreciated straight-line to zero value over the 10-year economic life of the project. Interest cost associated with financing the equipment purchase is estimated to be $40,000 annually. The expected salvage value of the machine at the end of 10 years is $200,000. One year ago a marketing survey...
10.2 California Imaging Center, a not-for-profit business, is evaluating the purchase of new diagnostic equipment. The equipment which costs $600,000, has an expected life of five years and an estimated salvage value of $200,000 at that time. The equipment is expected to be used 15 times a day for 250 days a year for cach year of the project's life. On average, cach procedure is projected to generate $80 in cash collections during the first year of use. Thus, net...
Georgia Health Center, a for profit hospital, is evaluating the purchase of a new diagnostic equipment. The equipment, which cost $600,000, has an expected life of five years and an estimated pretax salvage value of $200,000 at that time. The equipment is expected to be used 15 times a day for 250 days a year for each year of the project’s life. On average, each procedure is expected to generate $80 in collections, which is net of bad debt losses...
Multiple-Choice Exercise 7-1 Anniston Company purchased equipment and incurred the following costs: Purchase price $52,000 Cost of trial runs 750 Installation costs 250 Sales tax 2,600 What is the cost of the equipment? Oa. $52,000 Ob. $54,600 Oc. $54,850 Od. $55,600 Multiple-Choice Exercise 7-2 The cost principle requires that companies record tangible capital assets at: Oa. fair value. Ob. book value. Oc. historical cost. d. market value. Multiple-Choice Exercise 7-3 When depreciation expense is recorded each period, what account is...
DataPoint Engineering is considering the purchase of a new piece of equipment for $360,000. It has an eight year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $180,000 in nondepreciable working capital. Sixty-five thousand dollars of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 12-11. Table...
DataPoint Engineering is considering the purchase of a new piece of equipment for $255,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $250,000 in nondepreciable working capital. Eighty-two thousand dollars of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 12-11 Table 12-12....
Investment Evaluation Analysis Widget Company is considering upgrading its manufacturing equipment. The Vice-President of Production has identified three possible actions Widget could take to accomplish the upgrade, though none is required. One option would upgrade their current equipment and the other two options would replace the existing equipment with purchases of new equipment. The review committee has asked you to review each of the options to identify relevant cost data and to prepare a schedule comparing the three options to...
Required:
1. What is the amount of Apple’s accounts
receivable as of September 30, 2017?
2. Compute Apple’s accounts receivable turnover as
of September 30, 2017.
3. How long does it take, on average, for
the company to collect receivables for fiscal year ended September
30, 2017?
4. Apple’s most liquid assets include (a)
cash and cash equivalents, (b) short-term marketable
securities, (c) accounts receivable, and (d)
inventory. Compute the percentage that these liquid assets (in
total) make up of...