Bcor 340 chpt. 9 Questions and Complete Answers

Bcor 340 chpt. 9 Shelton Co. purchased a parcel of land six years ago for $855,500. At that time, the firm invested $127,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $45,000 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $907,000. What value should be included in the initial cost of the warehouse project for the use of this land? ANSWER: The opportunity cost of the building is what it could be sold for today, or $907,000 Bubbly Waters currently sells 330 Class A spas, 480 Class C spas, and 230 deluxe model spas each year. The firm is considering adding a mid-class spa and expects that if it does, it can sell 405 units per year. However, if the new spa is added, Class A sales are expected to decline to 240 units while the Class C sales are expected to increase to 505. The sales of the deluxe model will not be affected. Class A spas sell for an average of $12,500 each. Class C spas are priced at $6,300 and the deluxe models sell for $17,300 each. The new mid-range spa will sell for $8,300. What annual sales figure should you use in your analysis? ANSWER: Sales = 405($8,300) + (240 − 330)($12,500) + (505 − 480)($6,300) Sales = $2,394,000 McCanless Co. recently purchased an asset for $2,450,000 that will be used in a 3-year project. The asset is in the 4-year MACRS class. The depreciation percentage each year is 33.33 percent, 44.45 percent,