P10-16A

Document Sample
P10-16A Powered By Docstoc
					                            Student Name:
                                    Class:
                                             Problem 10-16A

                           ADK DELIVERY
                    Net Present Value Calculations

Alternative 1:
Cash Inflows                    Amount       Table Value   Present Value
 Annual Cash Inflows
 Salvage Value
 Working Capital Recovery
Cash Outflows
 Cost of Vans
 Working Capital Increase
Net Present Value


Alternative 2:
Cash Inflows:                   Amount       Table Value   Present Value
 Year 1
 Year 2
 Year 3
 Year 4
 Salvage Value
Cash Outflows
 Cost of Trucks
 Training Cost
Net Present Value


b. Present Value Indexes:
   Alternative 1
   Alternative 2
Given Data P10-16A:

                    ADK DELIVERY

Cash capital acquired                  $ 3,000,000

Alternative 1:
Cost of new vans                       $   540,000
Expected annual cash inflow increase       210,000
Useful life of new vans                          4
Combined salvage value of new vans     $    75,000
Additional working capital needed           30,000

Alternative 2:
Cost of new trucks                     $   600,000
Reduction in cash outflow-year 1           120,000
Reduction in cash outflow-year 2           240,000
Reduction in cash outflow-year 3           300,000
Reduction in cash outflow-year 4           330,000
Useful life of new trucks                        4
Salvage value of new trucks            $    60,000
Training costs required                     12,000

Desired rate of return                        16%
                                                            Student Name:
                                                                    Class:
                                                                             Problem 10-20A

                                      MULLEN ELECTRONICS

a. Net Present Value Using Straight-Line Depreciation

   Year                                                 1          2              3           4
   Revenue
   Depreciation
   Income before Tax
   Income Tax
   Net Income
   Add Back Depreciation
   Cash Flow

   Net Present Value                                         Table Value     Present Value
    Present Value of Cash Inflows
    Present Value of Salvage Value
    Present Value of Cash Outflows
    Net Present Value

   Present Value Index

b. Net Present Value Using Double-Declining-Balance Depreciation

   Year                                                 1          2              3           4
   Revenue
   Depreciation
   Income before Tax
   Income Tax
   Net Income
   Add Back Depreciation
   Cash Flow

   Net Present Value                                         Table Value     Present Value
    Present Value of Cash Inflows
     Year 1
     Year 2
     Year 3
     Year 4
    Present Value of Salvage Value
    Present Value of Cash Outflows
    Net Present Value

   Present Value Index

d. Payback and Unadjusted Rate of Return Using Straight-Line Depreciation
   Payback (in years)
   Unadjusted Rate of Return
   Alternative giving consideration to Salvage Value:
    Unadjusted Rate of Return

e. Payback and Unadjusted Rate of Return Using Double-Declining Balance Depreciation
   Payback (in years)
   Unadjusted Rate of Return
   Alternative giving consideration to Salvage Value:
    Unadjusted Rate of Return
Given Data P10-20A:

      MULLEN ELECTRONICS

Cost of equipment           $ 138,000
Useful life                         4
Salvage value               $ 18,000
Incremental cash revenues      72,000
Income tax rate                   30%
Desired rate of return            12%
                             Student Name:
                                     Class:
                                              Problem 10-21A

                         ALMA CORPORATION

a. Net present value of project

                                              Table Value   Present Value
   Cash Inflows
     Year 1
     Year 2
     Year 3
     Year 4
   Cash Outflows
    Cost of Investment
   Net Present Value


b. Revised net present value of project

                                              Table Value   Present Value
   Cash Inflows
     Year 1
     Year 2
     Year 3
     Year 4
   Cash Outflows
    Cost of Investment
   Net Present Value
Given Data P10-21A:

     ALMA CORPORATION

Investment              $ 150,000
Cash inflow:
 Year 1                 $ 31,500
 Year 2                   36,000
 Year 3                   45,000
 Year 4                   69,000
Discount rate                12%
Depreciation per year   $ 30,000
Useful life                    4
Tax rate                     30%

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:14
posted:11/25/2011
language:English
pages:6