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Salvage value of the equipment

1. (Ignore income taxes in this problem) The management of Byrge Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines. The aircraft would have a useful life of 8 years. The company uses a discount rate of 10% in its capital budgeting. The net present value of the investment, excluding the intangible benefits, is -$448,460. To the nearest whole dollar how large would the annual intangible benefit have to be to make the investment in the aircraft financially attractive?
a. $44,846
b. $56,058
c. $84,060
d. $448,460

2. (Ignore income taxes in this problem.) Croce, Inc., is investigating an investment in equipment that would have a useful life of 7 years. The company uses a discount rate of 8% in its capital budgeting. The net present value of the investment, excluding the salvage value, is -$515,967. To the nearest whole dollar how large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive?
a. $41,277
b. $885,021
c. $515,967
d. $6,449,588

3. Which of the following would be considered a "use" of cash for purposes of constructing a statement of cash flows?
a. a decrease in accounts receivable.
b. an increase in accounts payable.
c. an increase in common stock.
d. a decrease in bonds payable.

4. A decrease in the prepaid expenses account of $1,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:
a. an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.
b. a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
c. an addition of $1,000 under financing activities.
d. a deduction of $1,000 under financing activities.

5. Dividends paid to a company's own stockholders of $80,000 would be shown on the company's statement of cash flows prepared under the indirect method as:
a. an addition of $80,000 under investing activities.
b. a deduction of $80,000 under investing activities.
c. an addition of $80,000 under financing activities.
d. a deduction of $80,000 under financing activities.

Solution Preview

1. (Ignore income taxes in this problem) The management of Byrge Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines. The aircraft would have a useful life of 8 years. The company uses a discount rate of 10% in its capital budgeting. The net present value of the investment, excluding the intangible benefits, is -$448,460. To the nearest whole dollar how large would the annual intangible benefit have to be to make the investment in the aircraft financially attractive?

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Solution Summary

This provides the steps to calculate the salvage value of the equipment

$2.19