Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $140,000 and will increase annual expenses by $88,000 including depreciation. The oil well will cost $465,000 and will have a $10,000 salvage value at the end of its 10-year useful life. Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 12.47.)
Answers
Answer: Annual rate of return = 21.89%
Explanation:
Given that,
Expected increase in annual revenues by = $140000
Expected increase in annual expenses by = $88,000 including depreciation
Cost of oil well = $465,000
salvage value at the end of its 10-year useful life = $10,000
Expected Income = Expected increase in annual revenues - Expected increase in annual expenses
= 140000 - 88000
=$52000
Average investment =
= $237500
Annual rate of return =
=
= 21.89%
Related Questions
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Crystal Glassware Company issues $1,042,000 of its 14%, 10-year bonds at 97 on February 28,2019. The bonds pay interest on February 28 and August 31. Assume that Crystal uses thestraight-line method for amortization. What net amount will be reported for the bonds on theAugust 31, 2019 balance sheet?A) $1,010,740 B) $1,012,303 C) $1,009,177 D) $1,042,000
When the Fed carries out contractionary monetary policy through selling bonds __________. Select the correct answer below: it reduces the supply of loanable funds which raises the interest rate it reduces the supply of loanable funds which lowers the interest rate it increases the supply of loanable funds which lowers the interest rate it increases the supply of loanable funds which increases the interest rate
Katlin Markets is debating between a levered and an unlevered capital structure. The all-equity capital structure would consist of 75,000 shares of stock. The debt and equity option would consist of 40,000 shares of stock plus $320,000 of debt with an interest rate of 6.25 percent. What is the break-even level of earnings before interest and taxes between these two options? Ignore taxes.a.$46,333.33b.$44,140.71c.$42,208.15d.$49,666.67e.$42,857.14
Answers
Answer:
The correct answer is letter "B": $13.20.
Explanation:
The time value of money is a concept that states that a dollar today is always worth more than a dollar tomorrow based on the interest that can be accrued. In that sense, the sooner the money is received, the better since there will be more time for the interest to grow. The future value of money is calculated with the following formula:
FV=PV x [1+ i/n]^((n x t))
Where:
- FV = Future value of money
- PV = Present value of money
- i = interest rate
- n = number of compounding periods per year
- t = number of years
In the example:
FV = ?
PV = $1
i = 3,5%
n = 1
t = 75
Thus,
FV= $1 x [1+ (3,5%)/1]^((1 x 75))
FV= $1 x [1+ (35/10 x 1/100)/1]^((75))
FV= $1 x [1+ (35/1000)/(1/1)]^((75))
FV= $1 x [1+ 35/1000]^((75))
FV=$13,1985 ≅$13,20
Answer:
14.55
Explanation:
i think this is right and I hope that it helps:)
Answers
Following are the appropriate terms that are used in Business terms.
Explanation:
1. Advance income received - As it is prepaid
2. Stock / Current Asset - Depending upon the choice given
3. Advance interest received - Prepaid Advance
4. Accrued rent- Amount yet to be credited
5.Outstanding Expense - That is yet to be paid
6. Accrued Income - Revenue yet to be generated
7.Prepaid Expense - Paid in Advance
8. Outstanding Interest - Yet to be paid.
Above are the proper words that are used to in the Business terms that are globally used by any kind of enterprise.
Final answer:
The statements refer to common business and accounting concepts such as deferred revenue, accrued revenue, and prepaid expense among others. These terms help in recognizing and recording revenue and expenditures in the right accounting period.
Explanation:
Here are the appropriate terms for each statement:
Deferred Revenue - A revenue not yet recognized; collected in advance.
Prepaid Expense - Office supplies on hand that will be used in the next period.
Unearned Revenue - Interest revenue collected; not yet recognized.
Accrued Revenue - Rent not yet collected; already recognized.
Accrued Expense - An expense incurred; not yet paid or recorded.
Unbilled Revenue - A revenue recognized; not yet collected or recorded.
Prepaid Expense - An expense not yet incurred; paid in advance.
Accrued Interest - Interest expense incurred; not yet paid.
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Answers
Answer: Cost management, profitability, return on assets, competitive position and corporate social policy
Explanation:
Supply has the potential to contribute to cost management, profitability, return on assets, competitive position and corporate social policy.
Supply is defined as the amount of goods or services that a supplier is willing to offer for sale at a particular price and at a certain period. The amount of goods offered can determine the revenue generated and hence the profit made.
b. Du Pont analysis is based on the fact that return on equity (ROE) can be expressed as the sum of four other ratios.
c. It is relatively easy to interpret a ratio in the absence of comparative data.
d. There are no limitations to financial statement analysis, so analysts can always be confident of their conclusions.
e. None of the above statements is correct.
Answers
Answer:
The answer is e) None of the above statements is correct.
Explanation:
The current ratio, which measures the coverage of current assets against current liabilities, though used widely faces the limitation that it does not adequately reflect how well a company pays-off its short term debt. In simple terms, a high current ratio indicating how well a company pays short term debt is not forcefully appreciated in a given economic condition. as it is affected by elements such as time for collectinig bills. This is why to move in line with the going-concern principle, the acid test ratio is the best available measure of liquidity.
Du pont analysis is a form of financial ratio tools that comprises of 3 other financial ratios to provide better comprehension of the Return on Equity of a company. That is Net Profit Margin, Asset Turnover and Totat assets to Total equity ratios.
Interpretation of financial ratios requires the use of data so as to provide a comparison and determine the changes in the financial position of a company.
There are existing limitations to financial statement analysis such as the effect of inflation, the fact that data used for comparison is based on past information and it becomes to hard to predict the future. Considering these, analysts should rather be careful when communicating financial information.
Final answer:
The correct answer is 'b' - Du Pont's analysis is based on a relationship between ROE and three other ratios, not four. The statement 'a' isn't entirely true as the current ratio ignores the type and quality of current assets. Statements 'c' and 'd' are incorrect as analyzing a ratio without comparative data is misleading and limitations exist in financial statement analysis.
Explanation:
The correct statement about financial statement analysis is option 'b. Du Pont's analysis is based on the fact that return on equity (ROE) can be expressed as the product of three other ratios: the net profit margin, the total assets turnover, and the financial leverage ratio, not four. It's crucial to note that, while the current ratio can provide insight into a company's liquidity, it's not universally 'the best' measure because it fails to account for the nature and quality of current assets. Statements 'c' and 'd' are also incorrect; interpreting ratio data without comparative data lacks context and can be misleading, and financial statement analysis does have limitations such as not considering non-financial factors or possible manipulation of financial statements.
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B. the account that includes transactions like imports and exports, income earned by Americans abroad, and net transfers to other countries.
C. the national income account that tracks all purchases made by businesses within the last six months.
Answers
Answer:
The account that includes transactions like imports and exports, income earned by Americans abroad, and net transfers to other countries.
Explanation:
A current account can be defined as an account that record the different transactions a country carries out with another country. A current account comprises of net primary income, earnings from foreign investors that have occurred within a particular period of time.
Almost all countries are involved in trading of goods and services with another country, a current account helps to evaluate the manner in which a particular country traded their different goods with foreign markets.There tends to be a postive balance of a country exports more goods than it imports.
Check all that apply.
a. Challenge Nicola’s position.
b. Keep an open mind.
c. Separate facts from opinions.
d. Assume Nicola is incorrect.
Answers
Answer:
The correct answer is letter "B" and "C": Keep an open mind; Separate facts from opinions.
Explanation:
At the moment of solving different-point-of-view issues, it is important to be open-minded, otherwise, we could only remain with our opinion discarding others' critic point of view that could be useful at the moment of taking decisions. Besides, it does not matter if other individuals are biased since we can separate the facts from those points of view. Separating the facts implies analyzing what others have to say in deep regardless of what their emotions can be about that matter. It implies subtracting an objective idea from a subjective point of view.
Final answer:
To understand Nicola's argument, you should keep an open mind, separate facts from opinions, and instead of jumping to conclusions, enhance your understanding by asking clarifying questions.
Explanation:
To make sure you understand Nicola's argument, you can adopt the following ways:
- Keep an open mind: Try not to be prejudiced about Nicola based on your past interactions. Listen to what she is saying without preconception or bias. You might find even if you don't agree with everything, there could be useful elements in her suggestions.
- Separate facts from opinions: It's essential to distinguish between what Nicola presents as fact and what is purely opinion. This can significantly aid in legitimising or debunking her points in a fair and logical manner.
- You should not assume Nicola is incorrect, nor should you immediately challenge Nicola's position. Instead, ask clarifying questions to gain a full understanding and a broader perspective and contribute in a more useful manner to the problem-solving process.
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