Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Accounting Expert

Task1. Scenario analysis Your firm, Agrico Products, is considering a tractor which would have a cost of $36,000, would raise pre-tax operating cash flows before taking account of depreciation by $12,000 per year, and would be depreciated on the straight-line basis to zero over five years at the rate of $7,200 per year, starting the first year. (Thus, annual cash flows would be $12,000 before taxes plus the tax savings which result from $7,200 of depreciation.) The managers are having a heated debate about whether the tractor would actually last five years. The controller persists that she knows of tractors which have lasted only four years. The treasurer agrees with the controller, but he argues that most tractors actually do give five years of service. The service manager then states that some last for as long as eight years. Given this discussion, the CFO asks you to make a scenario analysis to find out the significance of the tractor's life on the NPV. Use a 40% marginal federal-plus-state tax rate, a zero salvage value, and a 8% WACC. Supposing each of the indicated lives has the same probability of occurring (probability = 1/3), what is the tractor's expected NPV? (Hint: Use the 5-year straight-line depreciation for all analyses and ignore the MACRS half-year convention for this problem.)

A. Tractor's NPV when actual life is 5 years?

B. Tractor's NPV when actual life is 4 years?

C. Tractor's NPV when actual life is 8 years?

D. Tractor's expected NPV?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93951

Have any Question? 


Related Questions in Financial Accounting

Project part i peyton approved - budget variance reportyou

Project Part I Peyton Approved - Budget Variance Report You are a manager for Peyton Approved, a pet supplies manufacturer. This responsibility requires you to create budgets, make pricing decisions, and analyze the resu ...

Paperwrite a 750- to 1050-word paper in which

PAPER Write a 750- to 1,050-word paper in which you: • Explain the principles of internal control. • Explain the use of cash and internal controls to prevent fraud. • Explain why corporations invest in stocks and debt se ...

Assignmenti a comparing three depreciation methods obj

Assignment I. A Comparing three depreciation methods ObJ. 2 Waldum Company purchased packaging equipment on January 5, 2012, for $135,000. The equipment was expected to have a useful life of three years, or 18,000 operat ...

Note answer all questions kindly note that answers for 10

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.   Question1 - 1 X, Y & Z were partners sharing profits and ...

Analyze the changes made to corporate governance rules

Analyze the changes made to corporate governance rules since the implementation of the Sarbanes–Oxley Act of 2002. Based on your analysis, formulate an opinion on whether or not these changes are sufficient in preventing ...

Assignment- cost concepts and types of costing1 given the

Assignment- Cost Concepts and Types of Costing 1. Given the cost formula, Y = $7,000 + $1.80X, what would be the total cost for an activity level of 4,000 units? A. $7,200 B. $7,000 C. $200 D. $14,200 2. In describing th ...

Assignmentfor all questions assume no other transactions or

Assignment For all questions, assume no other transactions or activities have taken place during the period except as noted. Answer all questions! Prepare and present calculations for partial credits for questions with c ...

Exercise 1 fixed versus variable cost behaviornasenko

Exercise 1: Fixed versus variable cost behavior Nasenko Company's cost and production data for two recent months included the following:                            March    April Production (units)   200       400 Rent   ...

What is the impact of implementing a lean system on the

What is the impact of implementing a lean system on the relationship between managers and employees? Does the lean systems have a positive or a negative impact on the relationships between managers and workers?

Cindy and glenn are married taxpayers who file a joint

Cindy and Glenn are married taxpayers who file a joint return. Both Cindy and Glenn work. During 2014, they had three young children for whom they paid $10,000 of qualifying child care expenses. What is the maximum and m ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro