1) cost.Richardses' TreeFarm, Inc. has branched into gardening over the years and is now considering adding patio furniture to its product lineup. Currently, the area where the patio furniture is to be displayed is a vacant slab of concrete attached to the indoor shop. The company originally paid $8,000to put in the slab of concrete three years ago. It would now cost $15000

15,000to put in the same slab of concrete. Should the company consider the concrete slab when expanding its outdoor garden shop to include patiofurniture? Ifyes, which value should ituse?

Should the company consider the concrete slab when expanding its outdoor garden shop to include patiofurniture? Ifyes, which value should ituse? (Select the bestresponse.)

A.

Yes, use $8000as the cost.

B.

Yes, use $15,000as the cost.

C.

No. The slab is a sunk cost unless there is another use for the slab that could provide cash flow toRichardses' Tree Farm. The additional cash flow that the slab could provide is the opportunitycost, not the current replacement cost or the original cost.

2) Working capital cash flow. CoolWater, Inc. sells bottled water. The firm keeps in inventory plastic bottles at10% of the monthly projected sales. These plastic bottles cost $0.004each. The monthly sales for the first four months of the coming year are asfollows:

January2,100,000

February:2,200,000

March: 2,900,000

April: 3,200,000

What is the monthly increase or decrease in cash flow for inventory given that an increase is a use of cash and a decrease is a source ofcash? Note: Enter a decrease as a negative number.

What is the change in working capital forJanuary?

$

(Round to the nearestdollar.)

What is the change in working capital forFebruary?

$

(Round to the nearestdollar.)

What is the change in working capital forMarch?

$

(Round to the nearestdollar.)

3)

Snow Tires Rain Tires All-Terrain Tires All-Purpose Tires

Cost per tire 41 31 45 38

Sales: January 41,000 21,000 5,000 63,000

Sales: February 36,000 35,000 4,400 55,000

Sales: March 15.000 41,000 7,000 50,000

Sales: April 2000 22,000 8,000 61,000

Working capital cash flow. Tires for Less is a franchise of tire stores throughout the greater Northwest. It has projected the unit sales and costs for each tire type for the next four months in the popupwindow The company policy is to have the nextmonth's anticipated sales for each tire type in the warehouse. Shipments are made to the various stores throughout the Northwest from the central warehouse. Calculate the monthly increase or decrease in cash flow for inventory for the first three months of the year given that an increase in inventory is a use of cash and a decrease in inventory is a source of cash.

SnowTires:

What is the change in working capital forJanuary?

$

(Round to the nearestdollar.)

What is the change in working capital forFebruary?

$

(Round to the nearestdollar.)

What is the change in working capital forMarch?

$

(Round to the nearestdollar.)

RainTires:

What is the change in working capital forJanuary?

$

(Round to the nearestdollar.)

What is the change in working capital forFebruary?

$

nothing

(Round to the nearestdollar.)

What is the change in working capital forMarch?

$

nothing

(Round to the nearestdollar.)

All-Terrain Tires:

What is the change in working capital forJanuary?

$

nothing

(Round to the nearestdollar.)

What is the change in working capital forFebruary?

$

nothing

(Round to the nearestdollar.)

What is the change in working capital forMarch?

$

nothing

(Round to the nearestdollar.)

All-Purpose Tires:

What is the change in working capital forJanuary?

$

nothing

(Round to the nearestdollar.)

What is the change in working capital forFebruary?

$

nothing

(Round to the nearestdollar.)

What is the change in working capital forMarch?

$

nothing

(Round to the nearestdollar.)

4) Depreciation expense.Richardses' TreeFarm, Inc. has just purchased a new aerial tree trimmer for $89,000. Calculate the depreciation schedule using aseven-year life(for the property class category of asingle-purpose agricultural and horticultural structure from Table10.3) for bothstraight-line depreciation andMACRS,LOADING...

. Use thehalf-year convention for both methods. Compare the depreciation schedules before and after taxes using a40% tax rate. What do you notice about the difference between these twomethods?

Using aseven-year life,straight-line depreciation, and thehalf-year convention for the first and lastyears, what is the annual depreciation of thetrimmer?

$

(Round to the nearestdollar.)

Using aseven-year life,straight-line depreciation, and thehalf-year convention for the first and lastyears, what is the depreciation for the first and lastyears?

$

(Round to the nearestdollar.)

Using aseven-year life and MACRSdepreciation,LOADING...

, what is the annual depreciation of the trimmer for year1?

$

(Round to the nearestdollar.)

What is the annual depreciation of the trimmer for year2?

$

(Round to the nearestdollar.)

What is the annual depreciation of the trimmer for year3?

$

(Round to the nearestdollar.)

What is the annual depreciation of the trimmer for year4?

$

(Round to the nearestdollar.)

What is the annual depreciation of the trimmer for year5?

$

(Round to the nearestdollar.)

What is the annual depreciation of the trimmer for year6?

$

(Round to the nearestdollar.)

What is the annual depreciation of the trimmer for year7?

$

(Round to the nearestdollar.)

What is the annual depreciation of the trimmer for year8?

$

n

(Round to the nearestdollar.)

Compare the depreciation schedules before and after taxes using a40% tax rate. What do you notice about the difference between these twomethods?(Select the bestresponse.)

A.

The difference is that the MACRS moves up the tax shield to the early years of depreciation yet the total tax shield is the same under both depreciation schedules.

B.

The difference is that theStraight-line moves up the tax shield to the early years of depreciation yet the total tax shield is the same under both depreciation schedules.

5) Brock Florist Company bought a new delivery truck for $29,000. It was classified as alight-duty truck. The company sold its delivery truck after three years of service. If afive-year life andMACRS,LOADING...

, was used for the depreciationschedule, what is theafter-tax cash flow from the sale of the truck(use a40% taxrate) if

a. the sales price was $14,000?

b. the sales price was $10,000?

c. the sales price was $3,000?

a.If the sales price was $14,000, what would be theafter-tax cashflow?

$

(Round to the nearestcent.)

b.If the sales price was $10,000, what would be theafter-tax cashflow?

$

(Round to the nearestcent.)

c. If the sales price was $3,000, what would be theafter-tax cashflow?

$