MANAGERIAL ACCOUNTING F/MGRS.
5th Edition
ISBN: 9781259969485
Author: Noreen
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 7C, Problem 7C.1E
To determine
Concept Introduction:
The
The net present value of the investment.
Expert Solution & Answer
Answer to Problem 7C.1E
The net present value of the investment is $145,511.
Explanation of Solution
The net present value of the investment is calculated as follows:
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Initial investment (I) | $ (2,000,000) | |||||
| Net operating income (A) | $ 300,000 | $ 300,000 | $ 300,000 | $ 300,000 | $ 300,000 | |
| Income tax (B) = (A*30%) | $ 90,000 | $ 90,000 | $ 90,000 | $ 90,000 | $ 90,000 | |
| Income after tax (C) = (A-B) | $ 210,000 | $ 210,000 | $ 210,000 | $ 210,000 | $ 210,000 | |
| $ 400,000 | $ 400,000 | $ 400,000 | $ 400,000 | $ 400,000 | ||
| Cash inflows after tax (E) = (C+D) | $ 610,000 | $ 610,000 | $ 610,000 | $ 610,000 | $ 610,000 | |
| Net | $ (2,000,000) | $ 610,000 | $ 610,000 | $ 610,000 | $ 610,000 | $ 610,000 |
| PV of $ 1(13%) (G) | 1.00000 | 0.88496 | 0.78315 | 0.69305 | 0.61332 | 0.54276 |
| PV = F*G | $ (2,000,000) | $ 539,823 | $ 477,719 | $ 422,761 | $ 374,124 | $ 331,084 |
| Net present value (Sum of PVs) | $ 145,511 |
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
What is the average cost per snowmobile with overhead?
I would like to know how these 3 questions are solved, and what the answers are.
Based on the following information, calculate the expected return and standard deviation of returns for each of the following stocks. Assume that each state of the economy is equally likely to happen. What are the covariance and correlation between the returns of the two stocks?
Economic state
Return on stock A
Return on stock A
Bull
6%
23%
Regular
12%
14%
Bear
8%
-7%
Stock T has a beta of 0.75. If the T-bill rate is 4% and market rate of return is 11%, what would be the expected return on stock T?
An asset has an expected rate of return of 13%. If the T-bill rate is 7% and the asset’s beta is 1.25, what would be the market rate of return?
Assume that there are two portfolios, A and B, having expected returns of 14% and 15%, respectively. If the portfolios betas are 1 and 1.25, respectively what would be the risk-free rate (Rf)?
Please provide answer this financial accounting question
Chapter 7C Solutions
MANAGERIAL ACCOUNTING F/MGRS.
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Do fast answer of this accounting questionsarrow_forwardCan you please answer the financial accounting question?arrow_forwardBrighton Electronics sold 4,200 units in December at a sales price of $50 per unit. The variable cost is $30 per unit. Calculate the total contribution margin, the contribution margin percentage, and the contribution margin per unit. No AI ANSWERarrow_forward
- What is the dividend amount of these financial accounting question?arrow_forwardBrighton Electronics sold 4,200 units in December at a sales price of $50 per unit. The variable cost is $30 per unit. Calculate the total contribution margin, the contribution margin percentage, and the contribution margin per unit.arrow_forwardMia Steel started the year with total assets of $325,000 and total liabilities of $174,000. During the year the business recorded $360,000 in revenues, $190,000 in expenses, and dividends of $99,000. Stockholders' equity at the end of the year was____.arrow_forward
- The Tom Corporation forecasts that total overhead for the current year will be $1,500,000 and that total machine hours will be 12,500 hours. Year to date, the actual overhead is $950,000, and the actual machine hours are 18,000 hours. If Tom Corporation uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead rate? a. $100 per machine hour b. $120 per machine hour c. $80 per machine hour d. $150 per machine hourarrow_forwardHi expert please give me answer general accountingarrow_forwardNonearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License