4. Black Pearl Yachts is considering a project that requires a $180,000 cash outlay and is expected to produce cash flows of $50,000 per year
for the next five years. Black Pearl's tax rate is 25%, and the before-tax
cost of debt is 8%. The current share price for Black Pearl's stock is $56,
and the expected dividend next year is $2.80 per share. Black Pearl's
expected growth rate is 5%. Assume that Black Pearl finances the
project with 60% equity and 40% debt, and the flotation cost for equity
is 4.0%. The appropriate discount rate is the weighted average cost of
capital (WACC). Which of the following choices is closest to the dollar
amount of the flotation costs and the NPV for the project, assuming
that flotation costs are accounted for properly?
Dollar amount of flotation costs NPV of project
A. $4,320
$17,548
B. $4,320
$13,228
C. $7,200
$17,548

For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the basic assumption, component, or accounting principle that is applied (if you agree) or violated (if you disagree).wagner corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar. spooner oil company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. no mention of the change was included in the financial statements. the change had a material effect on spooner's financial statements. cypress manufacturing company purchased machinery having a five-year life. the cost of the machinery is being expensed over the life of the machinery. rudeen corporation purchased equipment for $180,000 at a liquidation sale of a competitor. because the equipment was worth $230,000, rudeen valued the equipment in its subsequent balance sheet at $230,000.davis bicycle company received a large order for the sale of 1,000 bicycles at $100 each. the customer paid davis the entire amount of $100,000 on march 15. however, davis did not record any revenue until april 17, the date the bicycles were delivered to the customer. gigantic corporation purchased two small calculators at a cost of $32.00. the cost of the calculators was expensed even though they had a three-year estimated useful life. esquire company provides financial statements to external users every three years.