Question 1:
Depreciation Concept
1. Identify which of the following expenditures is considered as a capital cxpendilure that must be capitatied:
(a) Purchase land to build a warehouse at $300,000.
(b) Purchased a copy machine at $15,000.
(c) Installed a conveyor system at a cost of $55,000 to automate some part of production processes.
(d ) Painted the office building, both interior and exterior, at a cost of $22,000.
(e) Repaired the parking lot at a cost of $25,000.
(f) Installed a purified water fountain in the employee lounge at a cost of $3,000.
(g) Purchased a spare part for a stamping machine at a cost of $3800.
(h) Paid $12,000 to lease a dump truck for six months.
(i) Purchased a patent on an energy-saving device over five years at a cost of $30,000.
Question 2:
Three public investment alternatives are ;Available: A1 , A2, and A3 Their respective total benefits, costs, and first costs arc given in present worth as follows:
|
|
Proposals |
| Present worth |
A1 |
A2 |
A3 |
| B |
$400 |
$700 |
$500 |
| I |
$100 |
$300 |
$200 |
| C |
$100 |
$200 |
$150 |
These alternatives have the same service life. Assuming that there is no do nothing alternative, which project would you select, calculating on the basic of the benefit-cost ratio on incremental investment.
Question 3:
A local government is considering promoting tourism in the city. It will cost 55.000 to develop a plan. The anticipated annual benefits and costs are as follows:
Annual benefits: Increased local income and tax collections $117,400
Annual support service: Parking lot expansion. rest room $48,830
patrol car, and street repair
If the city government uses a discount rate of 6% and a study period of five Years, is this tourism project justifiable according to the benefit-cost analysis?