Credit Limit on a Line of Credit Company policy at Edson Enterprises is to finance all seasonal increases in net working capital with a line of credit. The company's controller collected the following information: Current Current Assets (CAD) Liabilities (CAD) 2019 (Actual) 72,120 21,450 Quarter 1 Quarter 2 92.950 28,950 63,500 21,870 53,400 12,950 Quarter 3 Quarter 4 2020 (Forecast) Quarter 1 79,140 24,950 Quarter 2 96,250 30,100 Quarter 3 68,570 24,860 Quarter 4 62,350 18,560 The most appropriate credit limit for Edson's line of credit in 2020 is closest to: Replacement Decision (Part 1) Random Company is considering buying a new machine for CAD 3,500,000. The new machine will last eight years and have a residual value of CAD 335,000 at the end of its life. This will replace an old machine with a current market value of CAD 500,000. The old machine could continue to be used for eight more years and have a salvage value of CAD 75,000 at that time. The company currently produces 1,000,000 units a year using the old machine at a contribution margin (price minus variable costs) of CAD 3.00. With the new machine, production will increase by 50,000 units per year and variable production costs will fall by CAD 1 per unit. The new machine will require CAD 70,000 in additional inventory over the next eight years. The machines are subject to a CCA rate of 20%. The marginal tax rate is 25.0% and the RRR is 8.0, compounded annually. Inflation is negligible. The present value of the net initial cash flows of this project is closest to: Select one: a. CAD-2,468,148 b. CAD-2,484,127 C. CAD-2,554,127 Credit Limit on a Line of Credit Company policy at Edson Enterprises is to finance all seasonal increases in net working capital with a line of credit. The company's controller collected the following information: Current Current Assets (CAD) Liabilities (CAD) 2019 (Actual) 72,120 21,450 Quarter 1 Quarter 2 92.950 28,950 63,500 21,870 53,400 12,950 Quarter 3 Quarter 4 2020 (Forecast) Quarter 1 79,140 24,950 Quarter 2 96,250 30,100 Quarter 3 68,570 24,860 Quarter 4 62,350 18,560 The most appropriate credit limit for Edson's line of credit in 2020 is closest to: Replacement Decision (Part 1) Random Company is considering buying a new machine for CAD 3,500,000. The new machine will last eight years and have a residual value of CAD 335,000 at the end of its life. This will replace an old machine with a current market value of CAD 500,000. The old machine could continue to be used for eight more years and have a salvage value of CAD 75,000 at that time. The company currently produces 1,000,000 units a year using the old machine at a contribution margin (price minus variable costs) of CAD 3.00. With the new machine, production will increase by 50,000 units per year and variable production costs will fall by CAD 1 per unit. The new machine will require CAD 70,000 in additional inventory over the next eight years. The machines are subject to a CCA rate of 20%. The marginal tax rate is 25.0% and the RRR is 8.0, compounded annually. Inflation is negligible. The present value of the net initial cash flows of this project is closest to: Select one: a. CAD-2,468,148 b. CAD-2,484,127 C. CAD-2,554,127
