# P10-16A

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```					                            Student Name:
Class:
Problem 10-16A

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:

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

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
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
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)
Alternative giving consideration to Salvage Value:

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

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