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R company is negotiating for the purchase of an asset that would cost $150,000, with the expectation that $30,000 per year could be saved in after-tax cash costs if the asset were acquired. The asset’s estimated useful life is 10 years with no residual value, and would be depreciated by the straight-line method. R’s pre-determined desired rate of return is 14%. The present value of ordinary annuity at 14% for 10 periods is 5.216 and the Present value of $1 in 10 periods at 14% is 0.270.

Assist the manager of R company, with the Net Present Value calculation for the investment to decide if the purchase consideration is desirable or not.

R company is negotiating for the purchase of an asset that would cost $150,000, with the expectation that $30,000 per year could be saved in after-tax cash costs if the asset were acquired. The asset’s estimated useful life is 10 years with no residual value and would be depreciated by the straight-line method. R’s pre-determined desired rate of return is 14%. The present value of ordinary annuity at 14% for 10 periods is 5.216 and the Present value of $1 in 10 periods at 14% is 0.270.

In the books of R company calculate the average annual accounting income expected to be generated by the proposed asset.

P Inc., is an electronic company and tests motherboards for a cellphone manufacturer. P anticipates performing between 5000 and 12000 tests during the month of March. Compared to industry averages, at the low range of activity P has a lower sales price per test, higher fixed costs and the same break-even point in number of tests performed. At the high range of activity, P’s sales price per test and fixed costs are the same as industry averages, and P’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. Sales price per test is $60 and variable costs per test $20.

What is P’s contribution margin per test?

P Inc., is an electronic company and tests motherboards for a cellphone manufacturer. P anticipates performing between 5000 and 12000 tests during the month of March. Compared to industry averages, at the low range of activity P has a lower sales price per test, higher fixed costs and the same break-even point in number of tests performed. At the high range of activity, P’s sales price per test and fixed costs are the same as industry averages, and P’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. Sales price per test is $60 and variable costs per test $20.

What is P’s break-even point in number of tests at the low activity range?

P Inc., is an electronic company and tests motherboards for a cellphone manufacturer. P anticipates performing between 5000 and 12000 tests during the month of March. Compared to industry averages, at the low range of activity P has a lower sales price per test, higher fixed costs and the same break-even point in number of tests performed. At the high range of activity, P’s sales price per test and fixed costs are the same as industry averages, and P’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. Sales price per test is $60 and variable costs per test $20.

What is P’s break-even point in number of tests at the high activity range?

P Inc., is an electronic company and tests motherboards for a cellphone manufacturer. P anticipates performing between 5000 and 12000 tests during the month of March. Compared to industry averages, at the low range of activity P has a lower sales price per test, higher fixed costs and the same break-even point in number of tests performed. At the high range of activity, P’s sales price per test and fixed costs are the same as industry averages, and P’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. Sales price per test is $60 and variable costs per test $20.

How many number of tests should P sell in order to achieve a gross profit of $160,000?

Tongo is a nation with a population of 100,000. Tongo had the following financial transactions for the year.

[table1 colalign=”left|right”]

; ;

Description; Amount

Gross domestic product; T$ 5,000,000

Transfer payments; T$ 625,000

Corporate income taxes; T$ 60,000

National retirement plan contributions; T$ 250,000

National retirement plan disbursements; T$ 220,000

Indirect business taxes; T$ 210,000

Personal taxes; T$ 300,000

Undistributed corporate profits; T$ 25,000

Depreciation; T$ 600,000

Net income earned abroad; T$ 50,000

[/table1]

Based on the information above, calculate Tongo’s net domestic product.

Tongo is a nation with a population of 100,000. Tongo had the following financial transactions for the year.

[table1 colalign=”left|right”]

; ;

Description; Amount

Gross domestic product; T$ 5,000,000

Transfer payments; T$ 625,000

Corporate income taxes; T$ 60,000

National retirement plan contributions; T$ 250,000

National retirement plan disbursements; T$ 220,000

Indirect business taxes; T$ 210,000

Personal taxes; T$ 300,000

Undistributed corporate profits; T$ 25,000

Depreciation; T$ 600,000

Net income earned abroad; T$ 50,000

[/table1]

Based on the information above, calculate Tongo’s national income.

Tongo is a nation with a population of 100,000. Tongo had the following financial transactions for the year.

[table1 colalign=”left|right”]

; ;

Description; Amount

Gross domestic product; T$ 5,000,000

Transfer payments; T$ 625,000

Corporate income taxes; T$ 60,000

National retirement plan contributions; T$ 250,000

National retirement plan disbursements; T$ 220,000

Indirect business taxes; T$ 210,000

Personal taxes; T$ 300,000

Undistributed corporate profits; T$ 25,000

Depreciation; T$ 600,000

Net income earned abroad; T$ 50,000

[/table1]

Based on the information above, calculate Tongo’s personal income.

Tongo is a nation with a population of 100,000. Tongo had the following financial transactions for the year.

[table1 colalign=”left|right”]

; ;

Description; Amount

Gross domestic product; T$ 5,000,000

Transfer payments; T$ 625,000

Corporate income taxes; T$ 60,000

National retirement plan contributions; T$ 250,000

National retirement plan disbursements; T$ 220,000

Indirect business taxes; T$ 210,000

Personal taxes; T$ 300,000

Undistributed corporate profits; T$ 25,000

Depreciation; T$ 600,000

Net income earned abroad; T$ 50,000

[/table1]

Based on the information above, calculate Tongo’s real per-capita output.

Tongo is a nation with a population of 100,000. Tongo had the following financial transactions for the year.

[table1 colalign=”left|right”]

; ;

Description; Amount

Gross domestic product; T$ 5,000,000

Transfer payments; T$ 625,000

Corporate income taxes; T$ 60,000

National retirement plan contributions; T$ 250,000

National retirement plan disbursements; T$ 220,000

Indirect business taxes; T$ 210,000

Personal taxes; T$ 300,000

Undistributed corporate profits; T$ 25,000

Depreciation; T$ 600,000

Net income earned abroad; T$ 50,000

[/table1]

Based on the information above, calculate Tongo’s disposable income.

Denmark and Netherland each produce only food and cloth. They have no other trading partners, no trade restrictions and no transportation costs. In Denmark, 2000 units of input (labor, land and capital) produce 200 bushels of food or 40 bolts of cloth and in the Netherland, the same amount of units of input produces 250 bushels of food or 25 bolts.

Which country has the highest opportunity cost of producing food?

Denmark and Netherland each produce only food and cloth. They have no other trading partners, no trade restrictions and no transportation costs. In Denmark, 2000 units of input (labor, land and capital) produce 200 bushels of food or 40 bolts of cloth and in the Netherland, the same amount of units of input produces 250 bushels of food or 25 bolts.

Which country has the absolute advantage in producing the food and cloth?

Denmark and Netherland each produce only food and cloth. They have no other trading partners, no trade restrictions and no transportation costs. In Denmark, 2000 units of input (labor, land and capital) produce 200 bushels of food or 40 bolts of cloth and in the Netherland, the same amount of units of input produces 250 bushels of food or 25 bolts.

Consider in the above scenario, Netherlands can produce 80 bolts of cloth( instead of 25 bolts) with 2000 units of input. Which country has the comparative advantage in producing the food and cloth?

Denmark and Netherland each produce only food and cloth. They have no other trading partners, no trade restrictions and no transportation costs. In Denmark, 2000 units of input (labor, land and capital) produce 200 bushels of food or 40 bolts of cloth and in the Netherland, the same amount of units of input produces 250 bushels of food or 25 bolts.

Consider in the above scenario, Netherlands can produce 80 bolts of cloth( instead of 25 bolts) or 250 bushels of food with 2000 units of input. What is the optimal solution for maximum production?

R company is negotiating for the purchase of an asset that would cost $150,000, with the expectation that $30,000 per year could be saved in after-tax cash costs if the asset were acquired. The asset’s estimated useful life is 10 years with no residual value and would be depreciated by the straight-line method. R’s pre-determined desired rate of return is 14%. The present value of ordinary annuity at 14% for 10 periods is 5.216 and the Present value of $1 in 10 periods at 14% is 0.270.

R has the policy to accept only investments that have a payback period of 4 years or less. Advise if the investment decision is acceptable or not based on the payback period calculation.

R company is negotiating for the purchase of an asset that would cost $150,000, with the expectation that $30,000 per year could be saved in after-tax cash costs if the asset were acquired. The asset’s estimated useful life is 10 years with no residual value and would be depreciated by the straight-line method. R’s pre-determined desired rate of return is 14%. The present value of ordinary annuity at 14% for 10 periods is 5.216 and the Present value of $1 in 10 periods at 14% is 0.270.

In estimating the internal rate of return, the factors in the table of present values of an annuity should be taken from the columns closest to what value?

P Inc., is an electronic company and tests motherboards for a cellphone manufacturer. P anticipates performing between 5000 and 12000 tests during the month of March. Compared to industry averages, at the low range of activity P has a lower sales price per test, higher fixed costs and the same break-even point in number of tests performed. At the high range of activity, P’s sales price per test and fixed costs are the same as industry averages, and P’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. Sales price per test is $60 and variable costs per test $20.

How would the cost of packaging box for the motherboards be categorised for costing purpose?

R company is negotiating for the purchase of an asset that would cost $150,000, with the expectation that $30,000 per year could be saved in after-tax cash costs if the asset were acquired. The asset’s estimated useful life is 10 years with no residual value and would be depreciated by the straight-line method. R’s pre-determined desired rate of return is 14%. The present value of ordinary annuity at 14% for 10 periods is 5.216 and the Present value of $1 in 10 periods at 14% is 0.270.

Calculate the accrual accounting rate of return based on the initial investment.

Denmark and Netherland each produce only food and cloth. They have no other trading partners, no trade restrictions and no transportation costs. In Denmark, 2000 units of input (labor, land and capital) produce 200 bushels of food or 40 bolts of cloth and in the Netherland, the same amount of units of input produces 250 bushels of food or 25 bolts.

Which country has the least opportunity cost of producing Cloth?

Denmark and Netherland each produce only food and cloth. They have no other trading partners, no trade restrictions and no transportation costs. In Denmark, 2000 units of input (labor, land and capital) produce 200 bushels of food or 40 bolts of cloth and in the Netherland, the same amount of units of input produces 250 bushels of food or 25 bolts.

Which country has the least opportunity cost of producing Cloth?