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
Part 3 Payback period
Part 4 Accounting rate of return
Income taxes
Net income
Net cash flow
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 4’s cash flow includes the $20,000 salvage value of the machine.
Year
1
2
3
4*
Part 5 Net present value of asset
Present Value of Net Cash Flows:
Asset cost
Final year’s book value
Sum
Average
Accounting rate of return
Average investment:
Income before taxes
Direct materials
Direct labor
Overhead excluding
depreciation on new asset
Depreciation on new asset
Selling and administrative expenses
Part 2 Expected income and cash flow
Expected annual sales of new product
Expected costs of new product:
Calculations
Part 1 Annual depreciation
Problem 24-01A
McGraw-Hill/Irwin
Instructor
480,000$
4
20,000$
1,840,000$
480,000$
672,000$
336,000$
160,000$
30%
7%
21.56%
107,356$
Given Data P24-01:
FACTOR COMPANY