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Accounting

 Accounting Basics Cost Accounting Financial Accounting Managerial Accounting Auditing Taxation

Q1) Following machines are mutually exclusive.You may choose only one.

Machine A will cost= \$150,000, save company \$40,000 per year for 5 years and can be sold for extra \$20,000 at the end of 5 years.  At your firm's 10% cost of capital, it has Net Present Value of \$14,050.  Its IRR (or ROI) is 13.4%.

Machine B will cost \$190,000, save company \$50,000 per year for 5 years, and have salvage value of \$25,000.  At your firm's 10% cost of capital, it has Net Present Value of \$15,062. Its IRR (or ROI) is 12.9%.

a. Which one would you select?

b. Describe what is meant by term Internal Rate of Return.

 PRESENT VALUE OF A SINGLE PAYMENT (Payment to be received in the future) Year 8% 9% 10% 11% 12% 13% 14% 15% 1 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 2 0.8573 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7561 3 0.7938 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 4 0.7350 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5718 5 0.6806 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 6 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 7 0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 8 0.5403 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 9 0.5002 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 10 0.4632 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 11 0.4289 0.3875 0.3505 0.3173 0.2875 0.2607 0.2366 0.2149 12 0.3971 0.3555 0.3186 0.2858 0.2567 0.2307 0.2076 0.1869 13 0.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1625 14 0.3405 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1413 15 0.3152 0.2745 0.2394 0.2090 0.1827 0.1599 0.1401 0.1229 16 0.2919 0.2519 0.2176 0.1883 0.1631 0.1415 0.1229 0.1069 17 0.2703 0.2311 0.1978 0.1696 0.1456 0.1252 0.1078 0.0929 18 0.2502 0.2120 0.1799 0.1528 0.1300 0.1108 0.0946 0.0808 19 0.2317 0.1945 0.1635 0.1377 0.1161 0.0981 0.0829 0.0703 20 0.2145 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 PRESENT VALUE OF AN ORDINARY ANNUITY (Payments at the end of each year) Year 8% 9% 10% 11% 12% 13% 14% 15% 1 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 2 1.7833 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 3 2.5771 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 4 3.3121 3.2397 3.1699 3.1024 3.0373 2.9745 2.9137 2.8550 5 3.9927 3.8897 3.7908 3.6959 3.6048 3.5172 3.4331 3.3522 6 4.6229 4.4859 4.3553 4.2305 4.1114 3.9975 3.8887 3.7845 7 5.2064 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.1604 8 5.7466 5.5348 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 9 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 10 6.7101 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 5.0188 11 7.1390 6.8052 6.4951 6.2065 5.9377 5.6869 5.4527 5.2337 12 7.5361 7.1607 6.8137 6.4924 6.1944 5.9176 5.6603 5.4206 13 7.9038 7.4869 7.1034 6.7499 6.4235 6.1218 5.8424 5.5831 14 8.2442 7.7862 7.3667 6.9819 6.6282 6.3025 6.0021 5.7245 15 8.5595 8.0607 7.6061 7.1909 6.8109 6.4624 6.1422 5.8474 16 8.8514 8.3126 7.8237 7.3792 6.9740 6.6039 6.2651 5.9542 17 9.1216 8.5436 8.0216 7.5488 7.1196 6.7291 6.3729 6.0472 18 9.3719 8.7556 8.2014 7.7016 7.2497 6.8399 6.4674 6.1280 19 9.6036 8.9501 8.3649 7.8393 7.3658 6.9380 6.5504 6.1982 20 9.8181 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 6.2593

Accounting Basics, Accounting

• Category:- Accounting Basics
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