ACCT310 Unit 5 IP

# ACCT310 Unit 5 IP - ACCT 310 Managerial Accounting Unit 5...

This preview shows pages 1–2. Sign up to view the full content.

ACCT 310 Managerial Accounting Unit 5 IP Template Name: Determine the total investment \$2,000,000 + \$1,300,000 = \$3,300,000 for one (1) lift cost of a lift Total investment 300 X 40 X \$55 = \$660,000 (anticipated inflow from the # of skiers Days used cost of lift ticket annual cash inflow lift tickets based on total skiers) per day Calculate the annual cash outflow 200 X \$500 = \$100,000 (projected outflow based on # days to Cost to run annual cash outflow cost to run the lift) run lift per day PV of cash flows @ 14% ( \$660,000 - \$100,000 ) X 6.623 = \$3,708,880 annual cash annual cash PV of an PV of cash inflow outflow annuity of \$1 flows @ ___% NPV \$3,708,880 - \$3,300,000 = \$408,880 PV of cash total NPV flows @ ____% investment Recommendation: 2. Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer. Calculate the net after-tax cash flow \$560,000 X 40% = \$224,000 net cash flow 1-tax rate after-tax cash flow PV of after-tax cash flows @8% \$224,000 X 0.7059 = \$158,121.60 after-tax PV of an PV of after-tax cash flow annuity of \$1 cash flows @___% PV of tax savings \$3,300,000 X 40% X 0.7059 = \$931,788 total tax rate factor PV of tax savings investment NPV after-tax \$158,122 + \$931,788 - \$3,300,000 = ### PV of after-tax PV of tax

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 08/11/2013 for the course ACCT 310 taught by Professor Scott during the Spring '11 term at AIU Online.

### Page1 / 2

ACCT310 Unit 5 IP - ACCT 310 Managerial Accounting Unit 5...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online