Management of the investment will a professional manager be needed or will the

Management of the investment will a professional

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· Management of the investment: will a professional manager be needed, or will the property themselves? · Is the assumption regarding salvage value ($0) at the end of the 30-year life rea · Knowledge of appropriate state and local laws governing residential rental prop · Is there any risk that the property in question might be appropriated by “eminen
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sheet Application d are ng sales ach e s the nnually ed ume 28, one- h doller of al However, s s x rate for 30 years $500,000 $20,000 of revenues
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2) 2) 2) property is equal to e basis of your not? n 10%? n 10%? tated in the attributable tax savings, apartment $500,000 $500,000 $1,000,000 $90,000 $78,000 $168,000 tor, you will
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$67,200 $100,800 $14,400 $12,480 $26,880 $16,128 $1,000,000 $950,242 $134,880 $152,039 ($66,917) rather than 10%. Tax Savings $14,545 $7,273 ax Savings 12% $ 12,987 $ 11,596 $ 10,353 $ 9,244 $ 8,253 as follows: i = 1, 28. The disclosed in
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$ 7,369 $ 6,580 $ 5,875 $ 5,245 $ 4,683 $ 4,181 $ 3,733 $ 3,333 $ 2,976 $ 2,657 $ 2,373 $ 2,118 $ 1,891 $ 1,689 $ 1,508 $ 1,346 $ 1,202 $ 1,073 $ 958 $ 856 $ 764 $ 682 $ 305 ($1,000,000) $1,134,806 $159,900 ($181,569) $113,137 ($1,000,000) $811,944
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$115,833 ($129,911) ($202,134) the couple manage alistic? perties? nt domain”
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Problem 12-59: Environment Cost Management Background Myers Manufacturing, Inc., wants to build a booth for painting the boxes it m signs. The company can choose either a solvent-based or a powder paint pr and investment required by each approach: Problem Information Solvent Powder Paint System Paint System Initial investment $400,000 $1,200,000 Unit paint cost 0.19 0.20 Estimated life in years 10 10 Annual units 2,000,000 2,000,000 The firm will incur additional environmental costs with the solvent paint system estimates annual environmental costs for the solvent paint system as follows: Units Unit Cost Monthly pit cleaning 12 $1,000 Hazardous waste disposal 183 3,000 Superfund fee 18,690 0.17 Worker training 2 1,500 Insurance 1 10,000 Amortization of air-emission permit 0.2 1,000 Air-emission fee 44.6 25 Record keeping 0.25 45,000 Wastewater treatment 1 50,000 Discount rate (WACC) 12% Income tax rate 40% MACRS depreciation percentages, 10-year property: Year % 1 10.00% 2 18.00%
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3 14.40% 4 11.52% 5 9.22% 6 7.37% 7 6.55% 8 6.55% 9 6.56% 10 6.55% 11 3.28% 100.00% Requirements 1. What is the difference in cost in today’s dollar for the two systems? 2. What is the most the firm is willing to pay for the powder-based system? (Adapted from German Boer, Margaret Curtin, and Louis Hoyt, “Environme Solution Solvent System Item PV 1 Initial investment $400,000 After-tax paint cost $228,000 After-tax environmental Costs $383,845 Total after-tax cash costs $611,845 Depreciation (MACRS) $40,000 Tax Savings on depreciation $16,000 Net after-tax cash costs $595,845 Discount factor (12%) 0.89286 Present value $3,359,719 $532,005 Total Cost $3,759,719 Power System Initial investment $1,200,000 After-tax paint cost $240,000 Depreciation (MACRS) $120,000 Management Accounting [September 1998], pp. 28–38.)
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Tax Savings on Depreciation $48,000 Net after-tax cash costs $192,000 Discount factor (@12%) 0.89286 PV $1,064,021 $171,429 Total Cost $2,264,021 Difference in total cost = $1,495,698 2. Based solely on financial considerations, the maximum the company sho estimate + difference in PVs of costs (from Part 1) = which represents an increase of 125%
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makes for small transformers to be used to power neon rocess. The following table summarizes the costs m but not with the powder paint system. The firm :
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ental Cost Management,” 2 3 4 5 6 $228,000 $228,000 $228,000 $228,000 $228,000 $383,845 $383,845 $383,845 $383,845 $383,845 $611,845 $611,845 $611,845 $611,845 $611,845 $72,000 $57,600 $46,080 $36,880 $29,480 $28,800 $23,040 $18,432 $14,752 $11,792 $583,045 $588,805 $593,413 $597,093 $600,053 0.79719 0.71178 0.63552 0.56743 0.50663 $464,800 $419,100 $377,125 $338,807 $304,006 $240,000 $240,000 $240,000 $240,000 $240,000 $216,000 $172,800 $138,240 $110,640 $88,440
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$86,400 $69,120 $55,296 $44,256 $35,376 $153,600 $170,880 $184,704 $195,744 $204,624 0.79719 0.71178 0.63552 0.56743 0.50663 $122,449 $121,629 $117,383 $111,070 $103,669 ould spend on the Power-Based System = original $2,695,698 over the original price.
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