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Student Name:
Class:
115,000$
Correct!
Net Net Cash
Income Flow
1,840,000$ 1,840,000$
(480,000) (480,000)
(672,000) (672,000)
(336,000) (336,000)
(115,000)
(160,000) (160,000)
77,000
480,000$
20,000
500,000$
250,000$
21.56%
Correct!
Present
Value Present
Net Cash of $1 at Value of Net
Flows 7% Cash Flows
168,900$ 0.9346 157,854$
168,900 0.8734 147,517
168,900 0.8163 137,873
188,900 0.7629 144,112
695,600$ 587,356$
(480,000)
107,356$
Correct!
Total
Amount invested
Net present value
Year
1
2
3
4*
Part 5 Net present value of asset
Present Value of Net Cash Flows:
Asset cost
Final year's book value
Sum
Average
Accounting rate of return
Average investment:
Income before taxes
Direct materials
Direct labor
Overhead excluding
depreciation on new asset
Depreciation on new asset
Selling and administrative expenses
Part 2 Expected income and cash flow
Expected annual sales of new product
Expected costs of new product:
Calculations
Part 1 Annual depreciation
Problem 24-01A
McGraw-Hill/Irwin
Instructor
480,000$
4
20,000$
1,840,000$
480,000$
672,000$
336,000$
160,000$
30%
7%
21.56%
107,356$
Given Data P24-01:
Discount rate for net present value of investment
Check figures:
(4)
(5)
Expected annual costs of new product:
Direct materials
Direct labor
Overhead excluding S-L depreciation on new machine
Selling and administrative expenses
Income taxes
FACTOR COMPANY
Cost of new machine
Life of new machine in years
Salvage value of new machine
Expected annual sales of new product
