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Unformatted text preview: Answer: 1) Annual depreciation = (Initial Investment  Scrap Value) / Useful Life = ( 364,000  49,000) / 7 = $45,000 Average annual Income = Annual Net Income  Depreciation = $ 33,124  $45,000 =  $11,876 Accounting Rate of Return =  $11,876 / 364,000 =  3.26% 2) Payback Period = Initial Investment / Annual Cash Flow = 364,000 / 33,124 = 10.99 Years. 3) Calculations Years 1 2 3 4 5 6 7 A Initial Cash Flow364000 B Annual Cash Flow 33124 33124 33124 33124 33124 33124 3312 C Terminal Cash Flow 4900 D = A+B+C Net Cash Flow364000 33124 33124 33124 33124 33124 33124 8212 E PV Factor @14% 1.0000 0.8772 0.7695 0.6750 0.5921 0.5194 0.4556 0.399 F = D x E Present Value364000 29056.14 25487.84 22357.76 19612.07 17203.57 15090.85 3281 G = Sum F Net Present Value202372 4) Calculations Years 1 2 3 4 5 6 7 A Initial Cash Flow364000 B Annual Cash Flow 33124 33124 33124 33124 33124 33124 3312 C Terminal Cash Flow 4900 D = A+B+C Net Cash Flow364000 33124 33124 33124 33124 33124 33124 8212 E PV Factor @15% 1.0000 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 0.375 F = D x E Present Value364000 28803.48 25046.5 21779.57 18938.75 16468.48 14320.42 3087 G = Sum F Net Present Value207769.3...
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 Spring '15
 JUSTIN
 Accounting, Depreciation, Net Present Value, 3.26%, $ 49,000, $33,124

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