Net present value method: Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method. To determine: The net present value of the project.

Question

Martin Hughes earns net self-employment income of $157,100. He works a second job from which he receives FICA taxable earnings of $127,600.Self-Employment tax =

Answer 1

Question

Chapter 26, Problem 26.19EX

a.

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To determine: The net present value of the project.

(b)

To determine

To explain: The rate of return based on the analysis.

(c)

To determine

Internal rate of return method:

Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return.

To determine: The internal rate of return for the given project

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Martin Hughes earns net self-employment income of $157,100. He works a second job from which he receives FICA taxable earnings of $127,600.Self-Employment tax =

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