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ACCT 310 Managerial Accounting Unit 5 IP Template Name: Determine the total investment \$2,000,000 + \$1,300,000 = \$3,300,000 for one (1) lift cost of a lift Prep & install Total investment 300 X 40 X \$55 = \$660,000 (anticipated inflow from the # of skiers Days used cost of lift ticket annual cash inflow lift tickets based on total skiers) per day Calculate the annual cash outflow 200 X \$500 = \$100,000 (projected outflow based on # days to Cost to run annual cash outflow cost to run the lift) run lift per day PV of cash flows @ 14% ( \$660,000 - \$100,000 ) X 6.623 = \$3,708,880 annual cash annual cash PV of an PV of cash inflow outflow annuity of \$1 flows @ ___% NPV \$3,708,880 - \$3,300,000 = \$408,880 PV of cash total NPV flows @ ____% investment Recommendation: 2. Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer. Calculate the net after-tax cash flow \$560,000 X 40% = \$224,000 net cash flow 1-tax rate after-tax cash flow PV of after-tax cash flows @8% \$224,000 X 0.7059 = \$158,121.60 after-tax PV of an PV of after-tax cash flow annuity of \$1 cash flows @___% PV of tax savings \$3,300,000 X 40%X 0.7059 = \$931,788 total tax rate factor PV of tax savings investment NPV after-tax \$158,122 + \$931,788 - \$3,300,000 = ### PV of after-tax PV of tax ... View Full Document

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