Week 10 Homework Submission - Click The Link Above To Submit

Week 10 Homework Submissionclick The Link Above To Submit Your Assign

· Week 10 Homework Submissionclick The Link Above To Submit Your Assign

· Chapter 17: P1 and P7 · Chapter 18: P8 PROBLEMS 1. Suppose the Quick Towing Company purchases a new tow truck. The old truck had a book value of $ 1,000 and was sold for $ 1,420. If Quick Towing is in the 34 percent marginal tax bracket, what is the tax liability on the sale of the truck? What is the after- tax cash flow on the sale?

2. Hammond’s Fish Market just purchased a $ 30,000 fork lift truck. It has a five- year useful life. The firm’s tax rate is 25 percent. a. If the fork lift is straight- line depreciated, what is the firm’s tax savings from depreciation? b. What will be its book value at the end of year three? c. Suppose the fork- lift can be sold for $ 10,000 at the end of three years. What is its after- tax salvage value?

7. The No- Shoplift Security Company is interested in bidding on a contract to provide a new security system for a large department store chain. The new security system would be phased into 10 stores per year for five years. No- Shoplift can purchase the hardware for $ 50,000 per installation. The labor and material cost per installation is approximately $ 15,000. In addition, No- Shoplift will need to purchase $ 100,000 in new equipment for the installation, which will be depreciated to zero using the straight- line method over five years. This equipment will be sold in five years for $ 25,000. Finally, an investment of $ 50,000 in net working capital will be needed. Assume that the relevant tax rate is 34 percent. If the No- Shoplift Security Company requires a 10 percent return on its investments, what price should it bid? 18. Using the income statements from the Mount Lewis Copy Centers for 2010 and 2011 in Problem 17, find the percentage change in sales, EBIT, and net income. Use them to compute the degree of operating leverage, financial leverage, and combined leverage. · Week 9 Homework Submission Click the link above to submit your assignment. · Chapter 15: P1 · Chapter 16: P3 and P4 PROBLEMS 1. Pretty Lady Cosmetic Products has an average production process time of forty days. Finished goods are kept on hand for an average of fifteen days before they are sold. Accounts receivable are outstand-ing an average of thirty- five days, and the firm receives forty days of credit on its purchases from suppliers. a. Estimate the average length of the firm’s short- term operat-ing cycle. How often would the cycle turn over in a year? b. Assume net sales of $ 1,200,000 and cost of goods sold of $ 900,000. Determine the average investment in accounts receivable, inventories, and accounts payable. What would be the net financing need considering only these three accounts? 3. Obtain a current issue of the Federal Reserve Bulletin, or review a copy from the Fed’s Web site ( http:// www. federalreserve. gov) or the St. Louis Fed’s Web site ( http:// www. stlouisfed. org), and determine the changes in the prime rate that have occurred since the end of 2000. Comment on any trends in the data. 4. Compute the effective cost of not taking the cash discount under the following trade credit terms: a. 2/ 10 net 40 b. 2/ 10 net 50 c. 3/ 10 net 50 d. 2/ 20 net 40

Paper For Above instruction

The provided assignment encompasses several financial problems and case analyses, primarily focusing on accounting for asset sales, depreciation, investment decisions, and trade credit terms. These problems require an understanding of tax implications, depreciation methods, project evaluation, financial leverage, and working capital analysis. This comprehensive set of questions aims to deepen the understanding of core financial management concepts through practical application.

Firstly, the sale of a truck involves calculating the tax liability and after-tax cash flows resulting from the disposal of an asset. The book value, sale price, and tax rate are crucial for determining the taxable gain and tax payment. The calculation involves subtracting the book value from the sale price to find the gain, then applying the tax rate to find the tax liability. The after-tax cash flow includes the sale price minus the tax payments, which provides insight into the actual cash proceeds after taxes.

Secondly, depreciation is explored through the purchase of a forklift truck. Straight-line depreciation evenly spreads the cost over its useful life, allowing for the calculation of annual depreciation tax savings. The book value after three years reflects accumulated depreciation, and the after-tax salvage value considers the residual value upon sale, adjusting for taxes on any gains or losses. These computations help assess the investment’s profitability and tax efficiency.

Thirdly, the analysis of bids for security system installations involves project evaluation, including initial costs, depreciation, working capital, and expected salvage value. The calculation of the required bid price incorporates the capital investment, operating costs, depreciation, tax effects, and desired return. This problem emphasizes the use of discounted cash flow techniques and sensitivity to tax implications in setting competitive bids for large projects.

Fourthly, the income statement analysis from Mount Lewis Copy Centers involves calculating percentage changes, degrees of operating and financial leverage, and combined leverage. These measures indicate the company’s operational and financial risk levels and how changes in sales volume impact earnings before and after financial considerations.

Further, the problems on short-term operating cycles, working capital management, and the effective cost of trade credit demonstrate practical applications of liquidity management, investment size, and cost of capital concepts. Calculations involve estimating inventory, receivables, payables, and the cycle turnover rates, contributing to efficient working capital strategies.

Lastly, the examination of changes in the prime rate over time, through data analysis, highlights macroeconomic impacts on borrowing costs and credit conditions. Understanding these trends enables better forecasting and strategic planning within a financial context.

This set of problems collectively enhances comprehension of essential financial and managerial accounting principles, emphasizing quantitative analysis, tax considerations, project evaluation, leverage management, and working capital optimization, vital for financial decision-making in business.

References

• Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice (15th ed.). Cengage Learning.
• Ross, S. A., Westerfield, R., & Jordan, B. D. (2019). Fundamentals of Corporate Finance (12th ed.). McGraw-Hill Education.
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• Federal Reserve Bank of St. Louis. (n.d.). The Federal Reserve Bulletin. Retrieved from http://www.stlouisfed.org
• Federal Reserve Board. (n.d.). The Federal Reserve's Web site. Retrieved from http://www.federalreserve.gov
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• Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.