ACC – Misc. Multiple Problems



3. A company has expected expenses (utilities, etc.) of $50,000/year. Its two workers, each earn
$25,000 per year and another employee who makes $14,000 plus $6,000 in overtime if sales
reach $120, 000 in a year. The company’s product costs $4/L to produce and sells for $7/L. What
is the minimum number of liters the store must sell to break even (note: at break-even: cost equals
revenue; like the IRR). Hint: browse break-even.

Good Luck Good Luck Good Luck
4. Select the most preferable equipment (8years useful life, 12% rate) from the table below. Use
two methods.
Parameter Equipment
First Cost $25,000 $35,000 $20,000 $40,000
Annual Costs $8,000 $6,000 $9,000 $5,000
Salvage Value $2,500 $3,500 $2,000 $4,000

5. A firm is planning purchasing one of the following two machines.
Initial Cost $3,900 $5,500
Salvage value $1,800 $3,100
Useful life 10 years 13 years
Annual Maintenance $390 $275(year 1-8), $425(year 9-13)
Interest rate 6% 6%

a. What is the annual cost equivalence of A and B?
b. What is the present worth of the costs of A and B?
c. If machine A was to be purchased and kept forever without any change in the annual
maintenance costs, what would be the present worth of all expenditures?
d. Using PW repeatability method, compare the worthiness of A and B.
e. What is the annual straight line depreciation for A and B?
f. What is the total straight line depreciation value of A and B after fifth year?
g. Present your final results (a to f) in a table form.

6. Last year AMTEG Inc. had $18.4 million in revenue, $1.5 million of operating expenses,
$500,000 capital investment, 1.2 million non-operating expense, and depreciation expenses of
$6.4 million. Using the corporate federal tax rates, what is the approximate federal tax this
corporation will have to pay for this tax year?

7. Senai Import Export Inc. sold a piece of equipment during the current tax year for $65,000. This
equipment had a cost basis of $208,000 and the accumulated depreciation was $151,000. Assume
the effective income tax rate is 39%. Based on this information, what is
a. the gain (loss) on disposal,
b. the tax liability (or credit) resulting from this sale, and
c. the tax liability (or credit) if the accumulated depreciation was $123,000 instead of


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