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TiannaPope8242

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1. Calculating Unadjusted Payback Period Unadjusted Payback Period = Initial Investment/Annual Cash Inflow Unadjusted Payback Period = 200000/46000 Unadjusted Payback Period = 4.35 Years Unadjusted Payback Period = 4.4 Years (Rounded to 1 Decimal) 2.a Calculating Accounting Rate of Return (ARR) on initial Investment Calculating Depreciation per year Depreciation = (Cost – Residual Value)/Useful Life Depreciation = ($200000 – 0)/10 Depreciation = $20,000 Calculating Accounting Rate of Return on Initial Investment Accounting Rate of Return (on Initial Investment) = Average Accounting Profit/Initial Investment x 100 Accounting Rate of Return (on Initial Investment) = (46000-20000)/200000 x 100 Accounting Rate of Return (on Initial Investment) = 26000/200000 x 100 Accounting Rate of Return (on Initial Investment) = 13% 2.b Calculating Accounting Rate of Return (ARR) on Average Investment Calculating Average Investment Average Investment = (Initial Investment + Investment at the end of project)/2 Average Investment = (200000 + 0)/2 Average Investment = $100000 Accounting Rate of Return (on Average Investment) = Average Accounting Profit/Average Investment x 100 Accounting Rate of Return (on Average Investment) = (46000-20000) / 100000 x 100 Accounting Rate of Return (on Average Investment) = 26000/100000 x 100 Accounting Rate of Return (on Average Investment) = 26% 3 and 4. Calculating Net Present Value (NPV) and Present value Payback Period Years Cash Inflow Disc. Factor @ 12% Present Value of Inflows Cummulative Present Value of Inflows 1 46000 0.892857 41071.43 41071.43 2 46000 0.797194 36670.92 77742.35 3 46000 0.71178 32741.89 110484.24 4 46000 0.635518 29233.83 139718.07 5 46000 0.567427 26101.64 165819.71 6 46000 0.506631 23305.03 189124.74 7 46000 0.452349 20808.06 209932.80 8 46000 0.403883 18578.63 228511.43 9 46000 0.36061 16588.06 245099.49 10 46000 0.321973 14810.77 259910.26 Present value of Inflow 259910.3 Less :- Initial Investment -200000.0 NPV 59910.3 4. Calculating Present Value Payback Period Present Value Payback Period = 6 Years + (200000-189124.74) / (209932.80-189124.74) Present Value Payback Period = 6 Years + 0.52 years Present Value Payback Period = 6.52 Years 5 and 6. Calculating Internal Rate of return(IRR) and Modified Internal Rate of Return(MIRR) Years Cash Flow 0 ($200,000.00) 1 46000 2 46000 3 46000 4 46000 5 46000 6 46000 7 46000 8 46000 9 46000 10 46000 5 IRR Formula =IRR((B38:B48,12%) 18.94% 6 MIRR Formula =MIRR((B38:B48),12%,12%) 14.97%
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