52) Johnson's Mini Mart is considering the purchase of a new electronic bar code scanner that will keep detailed records of every sale transaction. The scanner is likely to have little effect on operating revenues and expenses. Its acquisition is primarily for increasing management information about sales. The scanner costs $4,600 and would be included in Class 10 for tax purposes. Johnson's accountant has stated that due to the fast write-off of Class 10 assets (30% CCA rate), its real cost is less than $4,600. Due to technological obsolescence, it would have zero salvage value.   Required: a.Since the […]

  5) The total project approach to capital budgeting A) calculates the present value of all cash inflows and outflows under each alternative separately. B) calculates the net present value for the incremental cash flows. C) calculates the net present value of cash flows which differ between alternatives. D) uses gross cash flows to determine net present values. E) produces the same answer as the IRR method.   6) The differential approach is often considered superior to the total project approach to capital budgeting A) because it is easier to select the components for the model. B) because it uses […]

  65) An art distribution company has three divisions which operate autonomously. Their results for 2010 were as follows:   R-divisionJ-divisionG-division Sales$5,000,000$7,000,000$10,000,000 Contribution margin1,440,0001,700,0003,500,000 Operating income1,000,0001,750,0002,520,000 Investment base9,000,00010,000,00014,000,000   The company's desired rate of return is 20 percent.   Required: a.Compute each division's ROI. b.Compute each division's residual income. c.Rank each division by both ROI and residual income. d.Which division had the best performance in 2011? Why? 66) Museum Corporation uses the investment centre concept for the museums that it manages. Select operating data for three of its museums for 2011 are as follows:   MontrealTorontoVancouver Revenue$300,000$375,000$450,000 Total assets150,000125,000175,000 Net […]

  41) Terrain Vehicle has received three proposals for its new vehicle painting machine. Information on each proposal is as follows:   Proposal XProposal YProposal Z Initial investment in equipment$180,000$120,000$190,000 Working capital needed  0 010,000 Annual cash saved by operations: Year 175,00050,00080,000 Year 275,00048,00080,000 Year 375,00044,00080,000 Year 475,0008,00080,000 Salvage value end of year: Year 1100,00080,00060,000 Year 280,00060,00050,000 Year 340,00040,00030,000 Year 410,00020,00015,000 Working capital returned0010,000   Required: Determine each proposal's payback. 42) Fabian Company is considering the purchase of a piece of materials-handling equipment:   Net initial investment$125,000 Estimated Useful life8 years Estimated terminal disposal price$10,000 Estimated annual cash operating savings$35,000 […]

  31) Which of the following results of net present value analyses is the least acceptable? A) $(15,000) B) $(1,000) C) $12,000 D) $0 E) $20,000   Use the information below to answer the following question(s).   Wet Water Company drills residential and commercial wells. The company is in the process of analyzing the purchase of a new drill. Information on the proposal is provided below:   Initial investment:      Asset $80,000    Working capital $16,000 Operations (per year for four years):      Cash receipts $80,000    Cash expenditures $44,000 Disinvestment: Salvage value of drill (end of year […]