Accounting Assignment Week 5

Exercise 16-1
Identifying cash inflows and outflows Indicate which of the following items will result in cash inflows and which will result in cash outflows. The first one is shown as an example.

Initial investment

Don't use plagiarized sources. Get Your Custom Essay on
Accounting Assignment Week 5
Just from $13/Page
Order Essay

Outflow

Salvage values

Inflow

Recovery of working capital

Inflow

Incremental expenses

Outflow

Working capital commitments

Outflow

Cost-savings

Inflow

Incremental revenue

Inflow

Exercise 16-2
Determining the present value of a lump-sum future cash receipt Stan Sweeney turned 20 years old today. His grandfather established a trust fund that will pay Mr. Sweeney $80,000 on his next birthday. However, Stan needs money today to start his college education. His father is willing to help and has agreed to give Stan the present value of the future cash inflow, assuming a 10 percent rate of return. Required A. Use a present value table to determine the amount of cash that Stan Sweeney’s father should give him.

Using the Present Value of $1 table, The factor for 1 year at 10% rate of return is 0. 90909. The PV of $80,000 after year 1 is

PV = 80,000 * PV factor PV = 80000 * 0. 90909 PV = $72,727. 20
Based on The Present Value, Stan Sweeney’s father should give him $72,727. 20 B.

a) Use an algebraic formula to prove that the present value of the trust fund (the amount of cash computed in Requirement
b) is equal to its $80,000 future value.

Investment + (0. 90909 x Investment) = $80,000 $72,727 + (0. 12 x $72,727. 20) =$80,000 $72,727 + $7,273 = $80,000 $80,000 = $80,000
Exercise 16-3
Determining the present value of a lump-sum future cash receipt Marsha Bittner expects to receive a $600,000 cash benefit when she retires five years from today. Ms. Bittner’s employer has offered an early retirement incentive by agreeing to pay her $360,000 today if she agrees to retire immediately. Ms. Bittner desires to earn a rate of return of 12 percent.
Required

A. Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms. Bittner accept her employer’s offer? Ms. Bittner should not accept her employer’s offer.
B. Identify the factors that cause the present value of the retirement benefit to be less than $600,000 Inflation is one factor that could affect the present value of the retirement benefit. Taxes are another factor that could affect the present value of the retirement benefit.

Exercise 16-5
Determining net present value Metro Shuttle Inc. is considering investing in two new vans that are expected to generate combined cash inflows of $28,000 per year. The vans’ combined purchase price is $91,000. The expected life and salvage value of each is four years and $21,000, respectively. Metro Shuttle has an average cost of capital of 14 percent.
Required

a. Calculate the net present value of the investment opportunity.

Present Value
FV X PRESENT VALUE
= Present Value Equivalent

Period 1
28,000 X 0. 877193
 $24,561

Period 2
28,000 X 0. 769468
 $21,545

Period 3
28,000 X 0. 74972
 $18,899

Period 4
28,000 X 0. 592080
 $16,578

TOTAL

 $ 81,583

b. Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted. The investment opportunity is anticipated to earn a return that is below the cost of capital. The investment should not be accepted.

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Order your essay today and save 25% with the discount code: COCONUTPlace Order
+
Live Chat+1(978) 822-0999EmailWhatsApp