Miller.MACC350T#6 - Cumulative Cash Flow Cash Flow...

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Year Cash Flow 0 ($1,418,000) ($1,418,000) 1 $310,000 ($1,108,000) 2 $290,000 ($818,000) 3 $250,000 ($568,000) 4 $250,000 ($318,000) 5 $250,000 ($68,000) 6 $250,000 $182,000 7 $250,000 $432,000 8 $250,000 $682,000 9 $250,000 $932,000 10 $250,000 $1,182,000 $5 Therefore, the payback period is 5 years. Cumulative Cash Flow Payback Period
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Total Cash Inflow= $310,000 +$290,000 +($250,000 x 8 ) $2,600,000 Particulars Amount $2,600,000 $1,418,000 $1,182,000 10 $118,200 Average Amount Invested = ( Amount Invested +Residual Value ) / 2 ($1,418,000 + $0)/ 2 $709,000 ARR= 0.166713681 ARR of the project is 16.67% Total Net Cash inflows during operating life of the project Less: Total Depreciation during operating life of the project Total Operating Income during operating life Divide by Assets operating life in years Average annual operating income from asset Average annual operating income is $118,200
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PV = Annual cash inflow x Annuity PV facto for 8% interest rate for 5 year Present Value of Annuity Amount Cash needs $34,000 3.993 Present value of cash needs $135,762 PV= Annual cash inflow x Annuity PV facto for 6% interest rate for 5 year Present Value of Annuity Amount Cash needs $34,000 4.212 Present value of cash needs $143,208 PV factor at an interest rate of 8% for 5 years The amount ascertained that she needs to invest for
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