450well A657Compressor fuel200Well BMeter1000()Well C3,700980Well DHeater Treater150ShutWell EINAllocate on lease fuel back to the well heads..Allocate gas sales back to the well heads.+++Page1> of 4Based on the volumetric allocation of natural gas, assume the following: Tyler Oil Company owns 100% of the workinginterest in the above lease. Alex Walker owns a 1/8 royalty interest in the lease. The sales price is $8.00/mmbtu andthe state severance tax is 8%. Based on gas analysis the heating content is 1.03 Btu.What is the value of gas sales?What is the amount of gross revenue Tyler Oil Company should record?What amount should Tyler Oil Company record for gross royalty and severance tax?Provide the revenue entry by Tyler Company if PURCHASER assumes the responsibility of distributing severancetaxes and royalty.Provide the revenue entry by Tyler Company if Tyler assumes the responsibility and receives 100% of theproceedsWhat amount of gross revenue, royalty, severance taxes and net revenue should Tyler Oil Company record foreach well (A-B-C-D-E)?MacBook AirC-ZOOM

Total gas production:Total gas production =450 + 200 + 1 , 000 + 3 , 700 + 150 = 5 , 500Total gas…

Answered: 450 well A 657 Compressor fuel 200 Well…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 7E

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The directors of CEE Limited are currently considering two mutually exclusive investment projects - Status Quo and High Both projects are concerned with the purchase of new plant. The following data are available for each project. Status Qou High Tech Initial Cash flow 600,000 750,000 Year 1 120,000 185,000 2 145,000 185,000 3 170,000 185,000 4 190,000 185,000 5 220,000 185,000 6 240,000 185,000 7 - 185,000 8 - 185,000 The business has an estimated cost of capital of 15%. The business has sufficient funds to meet all capital expenditure requirements. Required: Calculate the payback period Calculate the net present value The approximate internal rate of return.
Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 28,500 −$ 28,500 1 13,900 4,050 2 11,800 9,550 3 8,950 14,700 4 4,850 16,300 a-1. What is the IRR for each of these projects? a-2. Using the IRR decision rule, which project should the company accept? multiple choice 1 Project A Project B a-3. Is this decision necessarily correct? multiple choice 2 Yes No b-1. If the required return is 11 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. Which project will the company choose if it applies the NPV decision rule? multiple choice 3 Project A Project B c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate…
In this assignment you will need to perform an analysis on a hypothetical discovery based on the following information: Field Size 1.4 Tcf Production/Reserve Ratio 7% of the original field size starting producing year 3 Gas Price $3.5/Mcf CapEx $1/Mcf capitalized in 5 years, straight-line depreciation Operating Cost $0.8/Mcf Royalty 10% Government Take 40% Cost recovery limit 60% of gross revenue Discount Rate 10% Income Tax Rate 33% Allow cost recovery carry forward 1. Evaluate the discovery – you need to calculate the total worth, worth to the company, government take, value in terms of entitlement interest and working interest. 2. Evaluate the producing gas reserve – total worth, worth to the company, government take, value in terms of entitlement interest and working interest.
Company XYZ extracts oil and accordingly owns a drilling platform in theArabian Gulf. By the end of the platform’s useful life, the firm is required toremove and dismantle it. Thus, the firm accounts for the removal anddismantling costs, which are depreciated over the platform’s useful life.Using the information below, you are asked to investigate whether therehas been an impairment of the platform: The carrying amount of the platform in the statement of financialposition is £5m.The company received an offer of £4.8m for the platform from aneighbouring competitor. This potential bidder would take theresponsibility of dismantling and removing the platform(including the costs) at the end of the asset’s life. The present value of the estimated cash flows from theplatform’s continued use is £5.4m, excluding any dismantlingcosts.The carrying value in XYZ’s balance sheet for the provision fordismantling and extraction is £0.8m. Describe in detail what is meant by the impairment of assets.…
A company that decides to value a project in which it wants to enter, presents the information in Figure 1. In addition, the investment in assets for 400 (Depreciable in straight line) and sale at the end for 205 value. Tax rate of 35%. What is the NPV of the project, if the WACC is 15% A.E.
Pearl Limited is considering upgrading its plant to expand it client base. The financial details of the investment proposal are as follows: Cost of plant R4 700 000 Import duty R 900 000 Installation cost R 450 000 Net cash flows Year 1-8 R1 700 000 per annum (excluding residual value) Residual/scrap value R1 300 000 The company uses straight-line depreciation. The cost of capital for projects of similar risk is 18%. Ignore taxation. Required: 2.1 C alculate the investment’s Accounting Rate of Return (ARR). 2.2 Briefly explain if the ARR is acceptable or not based on a target rate of return of 25%. 2.3 Assume a payback period of 3 years. Determine the
The directors of ALUN Ltd are currently considering two mutually exclusive investment projects. Both projects are concerned with the purchase of new plant. The following data are available for each project: Project 1 Project 2 £000 £000 Cost (immediate outlay) 130 70 Expected annual operating profit (loss): Year 1 38 20 Year 2 -1 -3 Year 3 6 15 Estimated residual value of the plant 10 10 The business has an estimated cost of capital of 10 per cent. It uses the straight-line method of depreciation for all non-current assets when calculating operating profit. Neither project would increase the working capital of the business. The business has sufficient funds to meet all capital expenditure requirements. Required: a) Calculate the net present value and the approximate internal rate of return for each project, and recommend which of the two investment…
1. Sun City Ltd commences construction of a multi purpose water park on 1 July 2022 for Pretoria Ltd. Sun City Ltd signs a fixed-price contract for total revenues of $50 million. The project is expected to be completed by the end of 2025 and Pretoria Ltd controls the asset throughout the period of construction. The expected cost as at the commencement of construction is $38 million. The estimated costs of a construction project might change throughout the project – in this example, they do change. The following data relates to the project (the financial years end on 30 June): Particulars 2023($m) 2024 ($m) 2025($m) Costs for the year 10 18 12 Costs incurred to date 10 28 40 Estimated costs to complete 28 12 - Progress billings during the year 12 20 18 Cash collected during the year 11 19 20 Prepare the journal entries for the 2023 financial year, assuming that the measure of progress on the contract cannot be reliably…
Management of Ivanhoe, Inc., an aviation firm, is considering purchasing three aircraft for a total cost of $193,011,370. The company would lease the aircraft to an airline. Cash flows from the proposed leases are shown in the following table. Years Cash Flow 1–4 $27,985,000 5–7 87,030,000 8–10 91,490,000 What is the IRR of this project? (Round answer to 2 decimal places, e.g. 15.25%.)
Objective: Should WAW lease or construct their own production facilityOption 1: ConstructCosts to incur:Buying land, construct building and getting ready for use$ 230,000Taxes, insurance, and repairs (per year)$ 30,000Intended years of use20Projected market value in 20 years$ 1,600,000Maximum down payment WAW can make$ 500,000Remainder in four payments of;$ 180,000Option 2: LeaseIntended years of use20First lease payment due now$ 100,000Rest of the lease payments (years 2-20)$ 90,000Operating costs to be paid by WAWRepairs (annual)$ 7,000Maintenance (annual)$ 25,000Initial one-time deposit, will be returned in year 20$ 40,000Required rate of return15%Methodology:The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction.Based on the analysis, they will recommend the preferred option (construction or leasing).
Should WLW lease or construct their own production facilityOption 1: ConstructCosts to incur:Buying land, construct building and getting ready for use$ 360,000Taxes, insurance, and repairs (per year)$ 34,000Intended years of use20Projected market value in 20 years$ 1,600,000Maximum down payment WLW can make$ 500,000Remainder in four payments of;$ 160,000Revenue opportunityBuilding annex will be leased to a tenant and will generate a lease revenue (per year) for 10 years$60,000Option 2: LeaseIntended years of use20First lease payment due now$ 90,000Rest of the lease payments (years 2-20)$ 90,000Operating costs to be paid by WLWRepairs (annual)$ 9,000Maintenance (annual)$ 26,000Initial one-time deposit, will be returned in year 20$ 40,000Required rate of return15%Methodology:The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction.Based on the analysis, they will recommend the preferred option (construction or leasing).
16. MODULATE Co. has the following assets.Vacant building to be leased out under operating lease4,000,000Building being constructed for TO ADJUST, Inc.800,000Building under construction to be used as office1,600,000Building under construction to be rented out under operating lease400,000Building rented out to MODULATE’s employees who pay rent at market rates3,200,000Office building awaiting disposal200,000How much is the total investment property?Group of answer choices7,600,0004,200,0004,400,0004,600,000

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