MANAGERIAL ACCOUNTING FOR MANAGERS
MANAGERIAL ACCOUNTING FOR MANAGERS
5th Edition
ISBN: 9781264196456
Author: Noreen
Publisher: MCG
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A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budge…
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Chapter 7A, Problem 7A.1E
To determine

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

the present value of cash inflows for each investment.

Expert Solution & Answer
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Answer to Problem 7A.1E

The present value of cash inflows for each investment is as follows:

Investment A =$ 18,519

Investment B =$ 21,832

Explanation of Solution

The present value of cash inflows for each investment is calculated as follows:

    Investment A Investment B
    PVF (18%)Cash inflow PV Cash inflow PV
    A B C=A*B D E=A*D
    Year 1 0.84746 $ 3,000 $ 2,542 $ 12,000 $ 10,169
    Year 2 0.71818 $ 6,000 $ 4,309 $ 9,000 $ 6,464
    Year 3 0.60863 $ 9,000 $ 5,478 $ 6,000 $ 3,652
    Year 4 0.51579 $ 12,000 $ 6,189 $ 3,000 $ 1,547
    Present value of cash inflow$ 18,519 $ 21,832

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Chapter 7A Solutions

MANAGERIAL ACCOUNTING FOR MANAGERS

Ch. 7A - Prob. 7A.1ECh. 7A - Prob. 7A.2ECh. 7A - Prob. 7A.3ECh. 7A - Prob. 7A.4ECh. 7A - Prob. 7A.5ECh. 7A - Prob. 7A.6E
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