ch13-AFM102s2012

An asset is purchased only one half of the prescribed

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Unformatted text preview: 946429 PV = $53,237 Managerial Accounting 13-74 Holland Company – An Example Step Four: Discount all cash flows to Step their present value as shown. their Items and Computations Cost of new equipment Working capital needed Net annual cash receipts Road repairs Salvage value of equipment Release of working capital Present value of CCA tax shield Net present value Managerial Accounting Holland Company (1) (2) (3) Tax Effect Year Amount (1) × (2) Now $ (300,000) – Now $ (75,000) – 1-10 $ 80,000 1-.30 6 $ (40,000) 1-.30 10 $ – 10 $ 75,000 – (4) (5) After-Tax 12% Cash Flows Factor $ (300,000) 1.000 $ (75,000) 1.000 $ 56,000 5.650 $ (28,000) 0.507 $ 0.322 $ 75,000 0.322 (6) Present V alue $ (300,000) (75,000) 316,400 (14,196) 24,150 (48,646) 53,237 $ 4,591 13-75 End of Chapter 13 Managerial Accounting...
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This note was uploaded on 09/30/2013 for the course AFM 102 taught by Professor R.ducharme during the Spring '09 term at Waterloo.

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