893 x 797 x 712 x 636 x 567 281295 251055 252760

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Unformatted text preview: ) X .893 X .797 X .712 X .636 X .567 (281,295) (251,055) (252,760) (200,340) (150,255) SUM = ($1,575,705) PERSONAL COMPUTER ($) Today Year 1 Year 2 Year 3 Year 4 Year 5 Acquisition cost computer (300,000) Acquisition cost software ( 75,000) System update ( 60,000) Salvage value 50,000 Operating costs (235,000) (235,000) (235,000) (235,000) (235,000) (235,000) Time sharing revenue -0-0-0-0-0-0_ Total cash flow 375,000 (235,000) (235,000) (295,000) (235,000) (205,000) X Discount factor X 1.000 X .893 X .797 X .712 X .636 X .567 Present value (375,000) (209,855) (187,295) (210,040) (149,460) (116,235) SUM = ($1,247,885) 16-19 Total-Cost Approach Total-Cost Net cost of purchasing Mainframe system ($1,575,705) Net cost of purchasing Personal Computer system ($1,247,885) Net Present Value of costs ($ 327,820) Mountainview should purchase the personal computer system for a cost savings of $327,820. 16-20 Incremental-Cost Approach Incremental-Cost INCREMENTAL ($) Acquisition cost computer Acquisition cost software System update Salvage value Operating costs Time sharing revenue Total cash flow X Discount factor Present value Today (100,000) 35,000 Year 1 Year 2 Year 3 Year 4 Year 5 20,000 20,000 ( 65,000) X 1.000 ( 65,000) 20,000 (100,000) (100,000) (100,000) (100,000) (100,000) 20,000 20,000 20,000 20,000 20,000 ( 80,000) ( 80,000) ( 80,000) ( 80,000) ( 60,000) X .893 X .797 X .712 X .636 X .567 ( 71,440) ( 63,760) ( 42,720) ( 50,880) ( 34,020) SUM = ($ 327,820) 16-21 Total-Incremental Cost Comparison Comparison Total Cost: Net cost of purchasing Mainframe system ($1,575,705) Net cost of purchasing Personal Computer system ($1,247,885) Net Present Value of costs ($ 327,820) Incremental Cost: Net Present Value of costs ($ 327,820) Different methods, Same results. 16-22 Managerial Accountant’s Role Managerial Managerial accountants are often asked to predict cash flows related to operating cost savings, additional working capital requirements, and incremental costs and revenues. When cash flow proj...
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This note was uploaded on 02/10/2014 for the course ACCT 331 taught by Professor Kline during the Fall '10 term at Drexel.

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