Question

TABLE 1 PRESENT VALUE OF $1 10% 4% 6% 7% 8% 9% 12% 14% 16% 20% 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 0.909091TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 5% 0.952381 1.859410 2.723248 3.545951 4.329477 4% 6% 7% 0.934579 1.808018 8% 0.925Perez Electronics is considering investing in manufacturing equipment expected to cost $310,000. The equipment has an estimatPerez Electronics is considering investing in manufacturing equipment expected to cost $310,000. The equipment has an estimat

0 0
Add a comment Improve this question Transcribed image text
Answer #1
a) PV of cash outflow = 3,10,000
Salvage value = 18000
No of years = 4
Depreciation amount = (3,10,000-18000)/4
= 73000
PV of cash inflow
1 2 3 4
Incremental cash revenue 1,55,000 1,55,000 1,55,000 1,55,000
(-) Depreciation 73000 73000 73000 73000
Net cash revenue after dep 82,000 82,000 82,000 82,000
(-) Tax rate (40%) 32800 32800 32800 32800
Cash revenue after tax 49,200 49,200 49,200 49,200
(+) Depreciation 73000 73000 73000 73000
Net cash revenue 1,22,200 1,22,200 1,22,200 1,22,200
Salavage value                           18,000
P.V factor 0.9091 0.8264 0.7513 0.683
Net cash inflow                                                                   1,11,092                                  1,00,986                                91,809                           95,757
Total cash inflow                                                                   3,99,644
Net present value                                                                       89,644 (3,99,644-3,10,000)
b) PV of cash outflow = 3,10,000
No of years = 4
Depreciation amount = (3,10,000)/4
= 77500
= 25% (77500/3,10,000)
Depreciation rate in double declining = 25*2
50%
PV of cash inflow
1 2 3 4
Incremental cash revenue 1,55,000 1,55,000 1,55,000 1,55,000
(-) Depreciation 155000 77500 38750 19375
(3,10,000*50%) (3,10,000-1,55,000)*50% (1,55,000-77500)*50% (77500-38750)*50%
Net cash revenue after dep 0 77,500 1,16,250 1,35,625
(-) Tax rate (40%) 0 31000 46500 54250
Cash revenue after tax 0 46,500 69,750 81,375
(+) Depreciation 155000 77500 38750 19375
Net cash revenue 1,55,000 1,24,000 1,08,500 1,00,750
Salavage value                           18,000
P.V factor 0.9091 0.8264 0.7513 0.683
Net cash inflow                                                                   1,40,911                                  1,02,474                                81,516                           81,106
Total cash inflow                                                                   4,06,006
Net present value                                                                       96,006 (4,06,006-3,10,000)
c) Payback Period 2 years
1 1,55,000 1,55,000
2 1,55,000 3,10,000
3 1,55,000 4,65,000
4 1,55,000 6,20,000
In 2 years 3,10,000 can be recovered
Unadjsuted rate of return 41% (126500/310000)
Average investment 122000+122000+122000+122000+18000/4 126500
d) Payback period 2 years
1 1,55,000 1,55,000
2 1,55,000 3,10,000
3 1,55,000 4,65,000
4 1,55,000 6,20,000
Unadjsuted rate of return 41% (126562/310000)
Average investment 155000+124000+108500+118750/4 126562.5
Add a comment
Know the answer?
Add Answer to:
TABLE 1 PRESENT VALUE OF $1 10% 4% 6% 7% 8% 9% 12% 14% 16% 20%...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT