Solution 1:
Straight line depreciation = ($640000 - $36000) / 4 = $151,000
Solution 2:
Expescted Net Income | ||
Revenues: | ||
Sales | $22,40,000 | |
Expenses: | ||
Direct Materials | $4,96,000 | |
Direct Labor | $6,88,000 | |
Overhead excluding depreciation | $4,96,000 | |
Selling and administrative expenses | $1,76,000 | |
Straight line depreciation | $1,51,000 | |
Total Expenses | $20,07,000 | |
Income before taxes | $2,33,000 | |
Income tax expense (30%) | $69,900 | |
Net Income | $1,63,100 | |
Expected net Cash Flow | ||
Net Income | $1,63,100 | |
Add: Straight line Depreciation | $1,51,000 | |
Net Cash Flow | $3,14,100 |
Solution 3:
Payback Period | ||||
Choose Numerator | / | Choose Denominator | = | Payback Period |
Cost of investment | / | Annual net Cash flow | = | Payback Period |
$6,40,000 | / | $3,14,100 | = | 2.04 |
Years |
Solution 4:
Average Investment = ($640000+$36000) / 2 = $338,000 | ||||
Accounting rate of Return | ||||
Choose Numerator | / | Choose Denominator | = | Accounting Rate of Return |
Annual Net Income after tax | / | Average Investment | = | Accounting Rate of Return |
$1,63,100 | / | $3,38,000 | = | 48.25% |
Solution 5:
Chart Values are based on | ||||||
n= | 4 | |||||
i= | 7% | |||||
Cash Flow | Select Chart | Amount | * | PV Factor | = | Present Value |
Annual cash Flow | Present Value of an annuity of 1 | $3,14,100 | * | 3.3872 | = | $10,63,920 |
Residual Value | present value of 1 | $36,000 | * | 0.7629 | = | $27,464 |
Present value of cash inflows | $10,91,384 | |||||
Present value of cash outflows | -$6,40,000 | |||||
Net Present Value | $4,51,384 |
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