Matthew_McCoy_Problem 25-1A

Matthew_McCoy_Problem 25-1A - Payback period = Cost of...

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Matthew McCoy Problem 25-1A Accumulated Book Year Depreciation Value Year 0 0 488,000 Year 1 118,200 369,800 Year 2 236,400 251,600 Year 3 354,600 133,400 Year 4 472,800 15,200 BURTLE COMPANY               Cash Flow Analysis - Machinery Investment Expected Accrual Figures Annual sales of new product 1,870,000 Deduct annual expenses      Cost of materials, labor, and overhead (except depreciation) 1,480,000    Depreciation - Machinery 118,200    Additional selling and administrative expenses 158,000 Annual pretax accrual income 113,800 Income taxes (40%) 45,520 Annual net income 68,280 Annual net cash flow
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Unformatted text preview: Payback period = Cost of investment/ Annual net cash flow Payback period = $488,000/ $186,480 = 2.62 years Annual average investment = (488,000 + 15,200)/2 = $251,600 Accounting rate of return = Annual after-tax net income/ Annual average investment Accounting rate of return = 68,280/ 251,600 = .2714 or 27.14% Annual discount rate 0.08 Initial investment-488,000 Annual cash flows 1 186,480 2 186,480 3 186,480 4 201,648 $140,794 Expected Net Cash Flows 1,870,000 1,480,000 158,000 45,520 186,480...
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This note was uploaded on 09/24/2011 for the course ACCT 212 taught by Professor Sheik during the Spring '11 term at Mountain State.

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Matthew_McCoy_Problem 25-1A - Payback period = Cost of...

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