Homework Answers
Depreciation = $500000 / 10 = $50000
After tax net income = (Cash inflows - Cash outflows -
Depreciation) x (1-tax rate)
= ($320000 - $200000 - $50000) x (1-0.70) = $49000
Annual Average Investment = ($500000+0)/2 = $250000
Accounting Rate of Return = $49000 / $250000 = 19.60%
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Go to page 2 Fill in the blanks. Diane Manufacturing Company is considering investing $500,000 in...
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Fill in the blanks. Diane Manufacturing Company is considering investing $500,000 in new equipment with an estimated useful life of 10 years and no salvage value. The equipment is expected to produce $320,000 in cash inflows and $200,000 in cash outflows annually. The company uses straight-line depreciation, and has a 30% tax rate. Diane Manufacturing desired rate of return on this project is 10%. (ALT Exercise A from text publisher) Calculate the Net Present Value: Net cash flows for years...
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