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ACC 206 Week 5 Assignment.doc

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ACC 206 Week 5 Assignment.doc PRG211

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ACC 206 Week 5 Assignment.doc
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This 0 page Study Guide was uploaded by Topseller Notetaker on Wednesday November 11, 2015. The Study Guide belongs to PRG211 at Ashford University taught by in Fall 2015. Since its upload, it has received 26 views. For similar materials see in Computer Programming at Ashford University.


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Date Created: 11/11/15
Chapter Eight Problems Please complete the following 5 exercises below in either Excel or a word document but must be single document You must show your work where appropriate leaving the calculations within Excel cells is acceptable Save the document and submit it in the appropriate week using the Assignment Submission button Chapter 8 Exercise 1 1 Basic present value calculations Calculate the present value of the following cash ows rounding to the nearest dollar a A single cash in ow of 12000 in five years discounted at a 12 rate of return b An annual receipt of 16000 over the next 12 years discounted at a 14 rate of return c A single receipt of 15000 at the end of Year 1 followed by a single receipt of 10000 at the end of Year 3 The company has a 10 rate of return d An annual receipt of 8000 for three years followed by a single receipt of 10000 at the end of Year 4 The company has a 16 rate of return Chapter 8 Exercise 4 4 Cash ow calculationsand net present value On January 2 20X1 Bruce Greene invested 10000 in the stock market and purchased 500 shares of Heartland Development Inc Heartland paid cash dividends of 260 per share in 20X1 and 20X2 the dividend was raised to 310 per share in 20X3 On December 31 20X3 Greene sold his holdings and generated proceeds of 13000 Greene uses the netpresent value method and desires a 16 return on investments a Prepare a chronological list of the investment39s cash ows Note Greene is entitled to the 20X3 dividend b Compute the investment39s net present value rounding calculations to the nearest dollar c Given the results of part b should Greene have acquired the Heartland stock Brie y explain Chapter 8 exercise 5 5 Straightforwardnet present value and internal rate of return The City of Bedford is studying a 600acre site on Route 356 for a new landfill The startup cost has been calculated as follows Purchase cost 450 per acre Site preparation 175000 The site can be used for 20 years before it reaches capacity Bedford which shares a facility in Bath Township with other municipalities estimates that the new location will save 40000 in annual operating costs a Should the landfill be acquired if Bedford desires an 8 return on its investment Use the netpresent value method to determine your answer Chapter 8 Problem 1 1 Straightforward netpresentvalue and payback computations STL Entertainment is considering the acquisition of a sightseeing boat for summer tours along the Mississippi River The following information is available Cost of boat 500000 Service life 10 summer seasons Disposal value at the end of 10 seasons 100000 Capacity per trip 300 passengers Fixed operating costs per season including stra1ght line 160000 depreciation Variable operating costs per trip 1000 Ticket price 5 per passenger All operating costs except depreciation require cash outlays On the basis of similar operations in other parts of the country management anticipates that each trip will be sold out and that 120000 passengers will be carried each season Ignore income taxes Instructions By using the netpresent value method determine whether STL Entertainment should acquire the boat Assume a 14 desired return on all investments round calculations to the nearest dollar Chapter 8 Problem 4 4 Equipment replacement decision Columbia Enterprises is studying the replacement of some equipment that originally cost 74000 The equipment is expected to provide six more years of service if 8700 of major repairs are performed in two years Annual cash operating costs total 27200 Columbia can sell the equipment now for 36000 the estimated residual value in six years is 5000 New equipment is available that will reduce annual cash operating costs to 21000 The equipment costs 103000 has a service life of six years and has an estimated residual value of 13000 Company sales will total 430000 per year with either the existing or the new equipment Columbia has a minimum desired return of 12 and depreciates all equipment by the straightline method Instructions By using the netpresent value method determine Whether Columbia should keep its present equipment or acquire the new equipment Round all calculations to the nearest dollar and ignore income taxes Columbia39s management feels that the time value of money should be considered in all longterm decisions Brie y discuss the rationale that underlies management39s belief


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