Reporting Intercorporate Interests (Equity vs Cost Method) 1. On January 1, 2007, Rotor Corporation acquired 30 percent of Stator Company’s Stock for $150,000. On the acquisition date, Stator reported Net assets of $450,000 valued at historical cost and %500,000 stated at fair Value. The difference was due to the increased value of buildings with a remaining life of 15 years. During 2007 and 2008 Stator reported Net Income of $25,000 and $15,000 and paid dividends $10,000 and $12,000, respectively.
We are provided with company's back ground which includes its operating capacity (150,000). Other information that is provided is the monthly operating costs while operating at capacity. It is also given that the brochures are sold at $17 per 100. The first part details the offer for a special order of 25,000 brochures. The offer is to buy these at $10 instead of the $17, which is the normal price.
If an 8% interest rate is applied, what is the current value of the future payments? 5. General Mills will receive $27,500 per year for the next 10 years as a payment for a weapon it invented. If a 12% rate is applied, should it be willing to sell out its future rights now for $160,000? 6.
Now, what would be the impact on net income, total profit margin, and cash flow? Their depreciation would be $750,000. The total revenue minus total expense will equal net income. Net income and revenue will be times by 100 to get the profit margin. Net income plus depreciation will equal their cash flow.
(That is, what is the Year-0 net cash flow?) Equipment =-70,000 Additional Cost =-15,000 Inc in NWC =-4,000 Net Cost =-$89,000 b. What are the net operating cash flows in Years 1, 2, and 3? Operating Cash Flows Depreciation: Amount to be depreciated = 70,000 + 15,000 = $85,000 Year Depreciation % Depreciation/year (MACR 3-year) (85,000 x %) 1 33.33% 28,331 2 44.45% 37,783 ------------------------------------------------- 3 14.81% 12,589 Total $78,703 Book Value @ end of 3 years: $6,297 Continued on next page. Operating Cash Flow Year 1 2 3 Savings 25,000 25,000 25,000 - Depreciation 28,331 37,783 12,589 Saving -Dep (3,331) (12,783) 12,411 Tax 1,332 5,113 (4,964) After-tax Oper Inc (1,998) (7,670) 7,447 ------------------------------------------------- + Depreciation 28,331 37,783 12,589 Net Cash Flows $26,333 $30,113 $20,036 c. What is the additional
There were about 8,000 filers who reported gross incomes of more than $10 million. Thus, under Obama’s proposed Buffet Rule, about a quarter of a million millionaires would pay higher taxes. The marginal tax rate is the percentage paid on gross income. A wealthy tax filer pays the size of their income that is taxed at the top 35 percent rate. Middle-class taxpayers generally pay marginal rates of 15 percent or 25 percent.
Fixed costs of manufacturing polyol are $90,000 per year and total variable costs equal $180,000. The operations research department has esti- mated that a 15 percent increase in output would not affect fixed costs but would reduce average variable costs by 60 cents per gallon. The marketing department has estimated the arc elasticity of demand for polyol to be –2.0. a. How much would Wyandotte have to reduce the price of polyol to achieve a 15 percent increase in the quantity sold?
Using the following calculation, we find: z= x- μ σ -1.96 = 10,000 – 20,000 σ σ=5102 Standard deviation σ = 5,102 μ = 20,000 mean 2. Stock outs were calculated by the four management numbers. Equation is: z = (x – μ)/ σ 15,000: Z = (15,000-20,000)/5102 z = -0.98 Then, reference the cumulative probabilities for standard deviation table in the beginning of the book to identify what -0.98 represents, which is .1635. Since stock outs are any quantity greater than what management suggested, they need to be subtracted from 1. 1 - .1635 = .8365 which = 83.65% Same logic/steps for the rest of the values: 18,000 24,000 28,000 Z = (18,000-20,000)/5102 z=(24,000-20,000)/5102 z=(28,000-20,000)/5102 z = -.39 z=.78 z= 1.57 1 - .3483 = .6517 1 - .7823 = .2177 1 –.9418 = .0582 which = 65.17% which = 21.77% which = 5.82% 3.
The equipment will last for seven years but will need a major overhaul costing $30,000 at the end of the fifth year. At the end of seven years, the equipment will be sold for $24,000. An increase in working capital totaling $30,000 will also be needed at the beginning. This will be recovered at the end of the seven years. On the positive side, Camus estimates that the new process will save $135,000 per year in environmental costs (fines and cleanup costs avoided).
They were given a 10% discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000. Stine estimates that the machinery will have a useful life of 10 years and a residual value of $20,000. If Stine uses straight-line depreciation, annual depreciation will be • $3,760. • $4,072.