An example of a discretionary item in the federal budget is

Problem 9-5. net present value and taxes [lo 1, 2] penguin productions is evaluating a film project. the president of penguin estimates that the film will cost $20,000,000 to produce. in its first year, the film is expected to generate $16,500,000 in net revenue, after which the film will be released to video. video is expected to generate $10,000,000 in net revenue in its first year, $2,500,000 in its second year, and $1,000,000 in its third year. for tax purposes, amortization of the cost of the film will be $12,000,000 in year 1 and $8,000,000 in year 2. the company’s tax rate is 35 percent, and the company requires a 12 percent rate of return on its films. required what is the net present value of the film project? to simplify, assume that all outlays to produce the film occur at time 0. should the company produce the film?

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Vulcan flyovers offers scenic overflights of mount st. helens, the volcano in washington state that explosively erupted in 1982. data concerning the company’s operations in july appear below: vulcan flyovers operating data for the month ended july 31 actual results flexible budget planning budget flights (q) 56 56 54 revenue ($350.00q) $ 16,500 $ 19,600 $ 18,900 expenses: wages and salaries ($3,300 + $91.00q) 8,354 8,396 8,214 fuel ($31.00q) 1,904 1,736 1,674 airport fees ($870 + $35.00q) 2,730 2,830 2,760 aircraft depreciation ($11.00q) 616 616 594 office expenses ($240 + $1.00q) 464 296 294 total expense 14,068 13,874 13,536 net operating income $ 2,432 $ 5,726 $ 5,364 the company measures its activity in terms of flights. customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount. required: 1. prepare a flexible budget performance report for july that includes revenue and spending variances and activity variances.