Problem 11-21A

Using the data in P11-21A on page 544 (little page numbers) of your textbook do a NPV analysis using the Total Cost Approach.

Do an Incremental Cost Approach analysis also below your total cost approach analysis. The total cost approach and the incremental cost approach should both be on the same page.

I already did the total cost approach but had trouble with incremental cost approach.

-My Grades-Fall 20171 Secure ! https://drive.google.com/drive/u/O/my-drive Introduction to Managerial Accounting 7th by Peter Brewer.pdf Assignments-fall 2017 Chegg Study Guided S: / 1 My Driv e-Google Drive x \ a Different methods for y X open with 544 Chapter II PROBLEM -2IA Net Present Value Analysis of a Lease or Buy Decision [LOI The Riteway Ad Agency provides cars for its sales staff. In the past, the company has a from a dealer and then sold the cars after three years of use. The company's present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company is considering two alternatives always purchased its cars Purchase alternative: The company can purchase the cars, as in the past, and sell the cars after three years of use. Ten cars will be needed, which can be purchased at a discounted price of S17.000 each. If this alternative is accepted, the following costs will be incurred on the fleet a whole: Annual cost of servicing, taxes, and licensing$3,000 Repairs, first year Repairs, second year Repairs, third year S1 ,500 $4,000 $8,000 At the end of three years, the fleet could be sold for one-half of the oniginal purchase price Lease alermative: The company can lease the cars under a three-year lease contract. The lease cost would be S55,000 per year (the first payment due at the end of Year I). As part of this lease cost, the owner would provide all servicing and repairs, license the cars, and pay all the taxes Riteway would be required to make a $10,000 security deposit at the beginning of the lease period, which would be refunded when the cars were returned to the owner at the end of the lease contract Riteway Ad Agency's required rate of return is 18%. Required 1. Use the total-cost approach to determine the present value of the cash flows associated with each alternative. Round all dollar amounts to the nearest whole dollar. 2. Which altemative should the company accep? PROBLEM 11-22A Simple Rate of Return; Payback [L-1, LO1-] Sharkey's Fun Center contains a number of electronic games as well as a miniature golf coarse and various rides located outside the building. Paul Sharkey, the owner, woald like to construct a water slide on one portion of his property. Mr.Sharkey has gathered the following information about the slide: a. Water slide equipment could be purchased and installed at a cost of S330,000. According to the Mr Sharkey has gathered the manufacturer, the slide would be usable for 12 years after which it would have no salvage value h. Mr. Sharkey would use straight-line depreciation on the slide equipment c. To make room for the water slide, several rides would be dismantled and sold. These rides are fully depreciated, but they could be sokd for $60,000 to an amusement park in a ncarby city d. Mr. Sharkey has concluded that about 50,000 more people would use the water slide each year than person (the same price that the Fun have be Center Page 577681 at e. Based I operating $134)(0, and S4.2, utilstes, 11:35 AM O Type here to search -My Grades-Fall 20171 Secure ! https://drive.google.com/drive/u/O/my-drive Introduction to Managerial Accounting 7th by Peter Brewer.pdf Assignments-fall 2017 Chegg Study Guided S: / 1 My Driv e-Google Drive x \ a Different methods for y X open with 544 Chapter II PROBLEM -2IA Net Present Value Analysis of a Lease or Buy Decision [LOI The Riteway Ad Agency provides cars for its sales staff. In the past, the company has a from a dealer and then sold the cars after three years of use. The company's present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company is considering two alternatives always purchased its cars Purchase alternative: The company can purchase the cars, as in the past, and sell the cars after three years of use. Ten cars will be needed, which can be purchased at a discounted price of S17.000 each. If this alternative is accepted, the following costs will be incurred on the fleet a whole: Annual cost of servicing, taxes, and licensing$3,000 Repairs, first year Repairs, second year Repairs, third year S1 ,500 $4,000 $8,000 At the end of three years, the fleet could be sold for one-half of the oniginal purchase price Lease alermative: The company can lease the cars under a three-year lease contract. The lease cost would be S55,000 per year (the first payment due at the end of Year I). As part of this lease cost, the owner would provide all servicing and repairs, license the cars, and pay all the taxes Riteway would be required to make a $10,000 security deposit at the beginning of the lease period, which would be refunded when the cars were returned to the owner at the end of the lease contract Riteway Ad Agency's required rate of return is 18%. Required 1. Use the total-cost approach to determine the present value of the cash flows associated with each alternative. Round all dollar amounts to the nearest whole dollar. 2. Which altemative should the company accep? PROBLEM 11-22A Simple Rate of Return; Payback [L-1, LO1-] Sharkey's Fun Center contains a number of electronic games as well as a miniature golf coarse and various rides located outside the building. Paul Sharkey, the owner, woald like to construct a water slide on one portion of his property. Mr.Sharkey has gathered the following information about the slide: a. Water slide equipment could be purchased and installed at a cost of S330,000. According to the Mr Sharkey has gathered the manufacturer, the slide would be usable for 12 years after which it would have no salvage value h. Mr. Sharkey would use straight-line depreciation on the slide equipment c. To make room for the water slide, several rides would be dismantled and sold. These rides are fully depreciated, but they could be sokd for $60,000 to an amusement park in a ncarby city d. Mr. Sharkey has concluded that about 50,000 more people would use the water slide each year than person (the same price that the Fun have be Center Page 577681 at e. Based I operating $134)(0, and S4.2, utilstes, 11:35 AM O Type here to search