Discover how IDNLearn.com can help you find the answers you need quickly and easily. Find in-depth and accurate answers to all your questions from our knowledgeable and dedicated community members.
Sagot :
Answer:
a. 0.17556 = 17.56%
b. 5.59 years
NPV when I is 9% = $60,787.91
NPV when I is 15% = $-59,904.72
Explanation:
Accounting rate of return = Average net income / Average book value
Average book value = (cost of equipment - salvage value) / 2
($510,000 - $51,000) / 2 = $229,500
40,290 / $229,500 = 0.17556 = 17.56%
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows
Payback period = Amount invested / cash flow
Cash flow = net income + depreciation expense
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
($510,000 - $51,000) / 9 = $51,000
Cash flow = $51,000 + 40,290 = $91,290
$510,000 / $91,290 = 5.59 years
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Cash flow in year 0 = $-510,000
Cash flow in year 1 to 8 = $91,290
Cash flow in year 9 = $91,290 + $51,000
NPV when I is 9% = $60,787.91
NPV when I is 15% = $-59,904.72
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
We appreciate your contributions to this forum. Don't forget to check back for the latest answers. Keep asking, answering, and sharing useful information. IDNLearn.com is your reliable source for accurate answers. Thank you for visiting, and we hope to assist you again.
