Bonka Toys is planning to buy a robot costing $75,000. After 5 years its salvage value will be $18,000. An overhaul costing $10,000 will be needed in Year 3. Operations and Maintenance costs will be $2000 per year. What is the cash flow stream for using this robot? (Hint: cash flow stream is a set of yearly cash flows for purchasing, using, and selling this robot).

Question:

Bonka Toys is planning to buy a robot costing $75,000. After 5 years its salvage value will be $18,000. An overhaul costing $10,000 will be needed in Year 3. Operations and Maintenance costs will be $2000 per year. What is the cash flow stream for using this robot? (Hint: cash flow stream is a set of yearly cash flows for purchasing, using, and selling this robot).

Assuming an interest rate of 10%

Note this was added by the tutor

Equivalent annual cost = $2646.41

Explanation:

The cash flow stream = Present value of cost / Annuity factor

PV of cost

PV of salvage value = 8,000× 1.1^(-4) =5464.107

PV of operating cost = 2000 × (1- 1.1^-4)/0.1 )= 6339.730

PV of overhaul costing = 10,000 × 1.1^(-3) = 7513.148

Present value (PV) of total cost:

= 6339.73 + 7513.148- 5464.10=8388.77

Annuity factor for 4 years at 10% = 3.1698

Cash flow stream = 8388.771 /3.1698

=$ 2,646.41

Equivalent annual cost = $2646.41

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Pacific Pounder 0 21,000
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Hawk-Dove (or Chicken) (t = tough, c = concede)
Two (young) players are engaged in a conflict situation. For instance, they may be racing their cars towards
each other on Main Street, while being egged on by their many friends. If player 1 hangs tough and stays in
the center of the road while the other player concedeschickens outby moving out of the way, then all glory is
his and the other player eats humble pie. If they both hang tough they end up with broken bones, while if
they both concede they have their bodiesbut not their prideintact.
Player 1 \ Player 2 t c
t -1,-1 10,0
c 0, 10 5, 5
The matrix form can be used to compactly represent the strategic form when there are two players even if
each player has more than two strategies to choose from.

Neptune Corporation owns 70 percent of Pluto Company's stock. On July 1, 20X4, Neptune sold a piece of equipment to Pluto for $56,350. Neptune had purchased this equipment on January 1, 20X1, for $63,000. The equipment's original 15-year estimated total economic life remains unchanged. Both companies use straight-line depreciation. The equipment's residual value is considered negligible.


79.


Required information


Based on the information provided, in the preparation of the 20X4 consolidated financial statements, equipment will be ______ in the consolidation entries.


debited for $6,650


debited for $56,350


debited for $63,000


credited for $63,000

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