20. Marshall\'s & Co. purchased a corner lot in Eglon City five years ago at a c
ID: 2652145 • Letter: 2
Question
20.
Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $530,000. The lot was recently appraised at $555,000. At the time of the purchase, the company spent $40,000 to grade the lot and another $3,100 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1,100,000. What amount should be used as the initial cash flow for this building project?
$1,630,000
$1,637,100
$1,662,100
$1,655,000
$1,659,000
21.
Use the table below to answer this question.
22. Ronnie's Custom Cars purchased some fixed assets two years ago for $50,000. The assets are classified as 5-year property for MACRS. Ronnie is considering selling these assets now so he can buy some newer fixed assets which utilize the latest in technology. Ronnie has been offered $27,000 for his old assets. What is the net cash flow from the salvage value if the tax rate is 34 percent?
$24,000.00
$20,757.60
$27,000.00
$25,980.00
$22,716.00
23. A project is expected to create operating cash flows of $30,500 a year for three years. The initial cost of the fixed assets is $63,000. These assets will be worthless at the end of the project. An additional $2,000 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of return is 14 percent?
$5,809.78
$5,159.72
$2,178.57
$9,159.72
$7,159.72
24.
Thornley Machines is considering a 3-year project with an initial cost of $840,000. The project will not directly produce any sales but will reduce operating costs by $435,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. At the end of the project the equipment will be sold for an estimated $90,000. The tax rate is 34 percent. The project will require $22,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley's requires a rate of return of 10 percent? Why or why not?
no; The NPV is $171,880.54
yes; The NPV is $74,000.00
yes; The NPV is $149,880.54
yes; The NPV is $65,335.09
yes; The NPV is $229,996.24
25.
A firm is reviewing a project with labor cost of $7.20 per unit, raw materials cost of $23.45 a unit, and fixed costs of $16,000 a month. Sales are projected at 9,200 units over the 3-month life of the project. What are the total variable costs of the project?
$148,990
$265,980
$281,980
$297,980
$215,740
MACRS 5-year property Year Rate 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.76%Explanation / Answer
20
22.
23.
Detail Amount Oppurtunity Cost of the land $5,55,000.00 Building Cost $1,10,000.00 Initial Cashflow $6,65,000.00 Other Initial Cost incurred at the time of purchase of the land is sunk costRelated Questions
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