4.27 Accounting 211 - costs 71,200 Net Income 27,200 27,200...

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Accounting 211 Tuesday, April 27th, 1999 Announcements: Final Exam Room Assignments: Sections 1-5, 23 102 Forum Sections 6-11, 24 108 Forum Sections 12-17 105 Forum Sections 18-22 111 Forum On sample exam #4, skip questions 1-9, 39, 40, 42-44, 52-55 Lecture notes:
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Chapter 24 Illustration Machine cost = 200,000 Estimated life = 10 years Estimated increase in annual cash flows = 29,000 Estimated salvage value = 20,000 Tax rate = 40% Discount rate = 8% Average Annual Net Income
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Revenues 29,000 - Dep. Exp. - 18,000 Income before taxes 11,000 - Taxes - 4,400 Net Income 6,600 Accounting Rate of Return 6,600 / 110,000 = 6%
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Payback Period 200,000 / 24,600 = 8.13 years Net Present Value
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24,600 x PA8/10 165,066 20,000 x P8/10 9,260 174,326 - Original Cost - 200,000 NPV - 25,674 Do not buy machine. Page 1065, Exercise 4
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Revenue 98,400 Operating
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Unformatted text preview: costs 71,200 Net Income 27,200 27,200 / 178,750 = 15.2%, do not invest Page 1065, Exercise 5 Cash revenues 397,500- cash expenses- 265,000- income taxes- 45,050 Net cash flow 87,450 415,000 / 87,450 = 4.75 years, do invest Page 1066, Exercise 8 57,250 x PA14/6 222,645- original cost- 219,500 3,145 Make the investment. Page 1069, Problem A3 16,000- Dep. Exp.- 2,250 IBT 13,750- taxes- 4,675 NI 9,075 Annual cash flows = 11,325 Net Present Value (old) 11,325 x PA14/15 69,558 10,000 x P14/15 1,400 70,958 50,000- Dep. Exp.- 12,600 IBT 37,400- taxes- 12,716 NI 24,684 Annual cash flows = 37,284 Net Present Value (new) 37,284 x PA14/25 256,253 35,000 x P14/25 1,330 Sale of old building 61,075 318,658- original cost- 350,000 NPV- 31,342...
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This note was uploaded on 02/20/2008 for the course ACCTG 211 taught by Professor Johnston during the Spring '99 term at Pennsylvania State University, University Park.

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4.27 Accounting 211 - costs 71,200 Net Income 27,200 27,200...

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