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Richardses' Tree​ Farm, Inc. has branched into gardening over the years and is now
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1) Cost. ​ Richardses' Tree​ Farm, 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 ​$8,000 to put in the slab of concrete three years ago. It would now cost ​$15000 to put in the same slab of concrete. Should the company consider the concrete slab when expanding its outdoor garden shop to include patio​ furniture? If​ yes, which value should it​ use?

Should the company consider the concrete slab when expanding its outdoor garden shop to include patio​ furniture? If​ yes, which value should it​ use? ​(Select the best​ response.)

A. Yes, use ​$8000 as the cost.

B. ​Yes, use ​$15,000 as the cost.

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

2) Working capital cash flow. Cool​ Water, Inc. sells bottled water. The firm keeps in inventory plastic bottles at 10​% of the monthly projected sales. These plastic bottles cost ​$0.004 each. The monthly sales for the first four months of the coming year are as​ follows:

​January 2,100,000

 ​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 of​ cash? ​Note: Enter a decrease as a negative number.

What is the change in working capital for​ January? ​(Round to the nearest​ dollar.)

What is the change in working capital for​ February? (Round to the nearest​ dollar.)

What is the change in working capital for​ March? ​(Round to the nearest​ dollar.)


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 popup​ window The company policy is to have the next​ month'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.

Snow​ Tires:

What is the change in working capital for​ January? ​(Round to the nearest​ dollar.)

What is the change in working capital for​ February? (Round to the nearest​ dollar.)

What is the change in working capital for​ March? (Round to the nearest​ dollar.)

Rain​ Tires:

What is the change in working capital for​ January? (Round to the nearest​ dollar.)

What is the change in working capital for​ February? (Round to the nearest​ dollar.)

What is the change in working capital for​ March? (Round to the nearest​ dollar.)

​All-Terrain Tires:

What is the change in working capital for​ January? (Round to the nearest​ dollar.)

What is the change in working capital for​ February? (Round to the nearest​ dollar.)

What is the change in working capital for​ March? ​nothing (Round to the nearest​ dollar.)

​All-Purpose Tires:

What is the change in working capital for​ January? (Round to the nearest​ dollar.)

What is the change in working capital for​ February?  (Round to the nearest​ dollar.)

What is the change in working capital for​ March? ​ (Round to the nearest​ dollar.)

4) Depreciation expense. ​ Richardses' Tree​ Farm, Inc. has just purchased a new aerial tree trimmer for ​$89,000. Calculate the depreciation schedule using a​ seven-year life​ (for the property class category of a​ single-purpose agricultural and horticultural structure from Table​ 10.3) for both​ straight-line depreciation and​ MACRS, LOADING...

.Use the​ half-year convention for both methods. Compare the depreciation schedules before and after taxes using a 40​% tax rate. What do you notice about the difference between these two​ methods?

Using a​ seven-year life,​ straight-line depreciation, and the​ half-year convention for the first and last​ years, what is the annual depreciation of the​ trimmer? (Round to the nearest​ dollar.)

Using a​ seven-year life,​ straight-line depreciation, and the​ half-year convention for the first and last​ years, what is the depreciation for the first and last​ years? ​(Round to the nearest​ dollar.)

Using a​ seven-year life and MACRS​ depreciation,

​,what is the annual depreciation of the trimmer for year​ 1? ​(Round to the nearest​ dollar.)

What is the annual depreciation of the trimmer for year​ 2? ​(Round to the nearest​ dollar.)

What is the annual depreciation of the trimmer for year​ 3? ​(Round to the nearest​ dollar.)

What is the annual depreciation of the trimmer for year​ 4? ​(Round to the nearest​ dollar.)

What is the annual depreciation of the trimmer for year​ 5? ​(Round to the nearest​ dollar.)

What is the annual depreciation of the trimmer for year​ 6? ​(Round to the nearest​ dollar.)

What is the annual depreciation of the trimmer for year​ 7? ​(Round to the nearest​ dollar.)

What is the annual depreciation of the trimmer for year​ 8? ​(Round to the nearest​ dollar.)

Compare the depreciation schedules before and after taxes using a 40​% tax rate. What do you notice about the difference between these two​ methods? ​ (Select the best​ response.)

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 the​ Straight-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 a​ light-duty truck. The company sold its delivery truck after three years of service. If a​ five-year life and​ MACRS, was used for the depreciation​ schedule, what is the​ after-tax cash flow from the sale of the truck​ (use a 40​% tax​ rate) 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 the​ after-tax cash​ flow? ​(Round to the nearest​ cent.)

b. If the sales price was ​$10,000​, what would be the​ after-tax cash​ flow? ​(Round to the nearest​ cent.)

c. If the sales price was ​$3,000​, what would be the​ after-tax cash​ flow?

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