Managerial Accounting Homework Revew Chapter 9 Answer Key

Managerial Accounting Homework Revew Chapter 9 Answer Key -...

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Chapter 9 EXERCISES E5. The numbers decrease from left to right in a given row because cash received in the future is worth less the higher your required rate of return. The numbers decrease from top to bottom in a given column because cash received further in the future is less valuable today. E6. Cash Present Value Flow Factor Total $800 3.7908 $ 3,032.64 800 .6209 496 .72 $3,529 .36 E7. Plan A Total $100,000 Plan B Cash Present Value Flow Factor Total $ 10,000 6.7101 $ 67,101 100,000 .4632 46,320 $113,421 Plan C Cash Present Value Flow Factor Total $20,000 6.7101 $134,202 Plan C should be selected as it has the highest present value. E8. Cash Present Value Flow Factor Total ($50,000) 1.0000 ($50,000.00)
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22,000 3.4331 75,528 .20 $ 25,528 .20 The net present value is positive so the project should be undertaken. E9. The investment should not be undertaken because the internal rate of return of 12% is less than the required rate of 18%. Initial outlay $79,100 Annuity amount 14,000 Outlay ÷ annuity amount = PV of annuity factor 5.6500 Internal rate of return 12% E11. Annual depreciation $50,000 ÷ 5 years $10,000.00 Annual tax savings $10,000 × .40 $4,000.00 Present value of $4,000 per year for 5 years at 12% $4,000 × 3.6048 $14,419.20 9- 2
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E12.
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