[jeff]

Thread #1 was getting hung up.

AUD - 79
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FAR - 76
REG - 92

Jeff Elliott, CPA (KS)
NINJA CPA | NINJA CMA | NINJA CPE | Another71

[scarletknight91]

thanks jeff

question for bec ppl

do we include fixed costs when you consider net present value of investments with capital budgeting?

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[scarletknight91]

like to calculate profitability of a project, do we take into consideration any relevant fixed costs (i know fixed costs arent usually relevant but they could be controllable which makes them relevant)

im using the example for B3-8 for all the becker ppl out there

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[Determined CPA]

Do you mean like depreciation? I suppose so since depreciation is used in the calculation. Or do you mean something else, like rent? I think for NPV you only use costs that have a direct effect on the cash flow (inflow or outflow), which is why depreciation is used. I cant think of any others that would impact cash flow.

You use relevant FC when deciding things like make/vs buy and things of that nature…

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[scarletknight91]

Okay let's say a machine costs $200,000. Machine uses straight-line depreciation and has a useful life of five years @ a tax rate of 40%.

The new machine is expected to increase annual sales by 20,000 units at a sales price of $40 per unit. Incremental operating costs are comprised of $30 per unit in variable costs and total fixed costs of $40,000 per year.

What's the NPV?

Is the yearly net inflow calculated this way OPTION 1:

Net Proceeds from sales = 20,000(10) – 40000 = 160000*.6 = 96000

Depcreciation Tax Shield= 16000

Total Annual Inflow = $112000

OR this way OPTION 2:

Net Proceeds from sales = 20,000(10) = 200000*.6 = 120000

Depcreciation Tax Shield= 16000

Total Annual Inflow = $136000

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[Determined CPA]

Came across this link…a quick 35 question quiz. Focuses a lot on bonds/stock/that crap. Good luck!

edited by jeff: friends don't let friends to random internet quizzes.

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[taxman89]

Okay let's say a machine costs $200,000. Machine uses straight-line depreciation and has a useful life of five years @ a tax rate of 40%.

The new machine is expected to increase annual sales by 20,000 units at a sales price of $40 per unit. Incremental operating costs are comprised of $30 per unit in variable costs and total fixed costs of $40,000 per year.

you take the

20,000 x 40 = 800,000 Revenue

20,000 x 30 = 600,000 Variable Cost

40,000 Fixed Cost

=160.000 increased income.

you need a rate of return to find NPV because you would take the present value of an annuity and multiply it times this 160k i think

AUD - 75
BEC - 77
FAR - 78
REG - 82

AUD: 61-67-75 (Thanks ninja aud)
BEC: 77
FAR: 78
REG:69-73-70-82

Aud-75 3x I knew i never liked you
Bec-77 1x being in the bubble is stressful
Reg-82 4x its not me its you...and no we cant be friends
Far-78 1x easiest section

[Determined CPA]

scarletknight91 – is this a real question? Ive never seen a question for NPV include a fixed cost component before. Now im going to be google crazy. if you find the answer please share bc this will bother me. lol

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[taxman89]

i could be totally wrong but thats how i am reading the problem…….

AUD - 75
BEC - 77
FAR - 78
REG - 82

AUD: 61-67-75 (Thanks ninja aud)
BEC: 77
FAR: 78
REG:69-73-70-82

Aud-75 3x I knew i never liked you
Bec-77 1x being in the bubble is stressful
Reg-82 4x its not me its you...and no we cant be friends
Far-78 1x easiest section

[scarletknight91]

i modified it from a becker final exam question. the actual question asked for something else, but i noticed that it included fixeed costs which i hadnt seen before. and taxman you are correct there was npv table in the question but trying to copy and paste that would be impossible. i just wanted to see if ppl would include it in their calculation to find the net inflow

also Determined CPA, how did you score on that quiz? i got a 77..

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[Determined CPA]

Yeah, I guess that makes sense taxman..the questions usually say ‘after(or before) tax income stream. I guess in that amount would include the fixed portion.

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Determined CPA]

I got a 74 – which is my worst nightmare

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[scarletknight91]

8.Which of the following products has the lowest price elasticity of demand?

A.Autos

B.Recreational vehicles

C.Bread

D.Furniture

the answer is C but isn't the meaning of lowest the most inelastic? these answer choices stink because inelastic goods are like medicine and absolute necessities that people need to survive (aka diabetic meds)

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[scarletknight91]

12.Which of the following corresponds to interest and dividends received by residents in the U.S. from investments in other countries?

A.A credit in the capital account

B.A credit in the current account

C.A debit in the capital account

D.A debit in the current account

what on earth is a current and a captial account?

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[scarletknight91]

that quiz is highly questionable haha one of the questions was this

15.Which of the following is not a stock exchange?

A.New York Stock Exchange (NYSE)

B.American Stock Exchange (AMEX)

C.Boston Stock Exchange

D.NASDAQ

and it said the NASDAQ was not a stock exchange…. lol

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[Determined CPA]

exactly, I would want to pick something like health care or something. I think I picked A bc people will need to still drive and I assumed the other 3 could be substituted. I guess I thought ppl would stop eating bread LOL. ugh.

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Author]

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