Russell Joseph L.

Lorete
BSA 3 A

QUIZ
Problem 1

Purchase Price 1260000.00

Freight Charges 35000.00
Installation Cost 30800.00
Special Attachments incurred 77000.00
Additional Working Capital 154000.00
Additional Tax on Savings on Overhaul (168000 x .30) 50400.00
Less: Savings on Overhaul 168000.00
Less: Proceeds on Sale of Equipment 30800.00
Net Investment 1408400.00

Problem 2
1.) Sales 8400000.00
Less: Cost of Sales
Materials 1120000.00
Labor 1680000.00
FOH 1092000.00 3892000.00
Gross Profit 4508000.00
Less: Selling & Admin Expenses 980000.00
Net Income Before Taxes 3528000.00
Less: Income Taxes 1159200.00
Net Income After Taxes 2368800.00
Add: Depreciation 336000.00
Annual Cash Flow 2704800.00

Cost of Equipment 1680000.00

Divide: Annual Cash Flow 2704800.00
Payback Period 0.62

2.) Payback Reciprocal (1/.62) 1.61

3.) Net Income 2368800.00

Divided by: Original Investment 1680000.00
Accounting Rate of Return 1.41

Problem 3
a Revenue 100000.00
Less: Cash Expenses
Salaries 30000.00
Utilities 9600.00
Water Usage 4400.00
Supplies 6000.00
Repairs/Maintenance 10000.00 60000.00
Annual Inflow 100000.00

b. PV Inflow (40,000 x 4.4941) 179764.00

PV Outflow (160,000 x 1.00) 160000.00
NPV 19764.00

c. Internal Rate of Return Factor (160,000/40,000) 4.00

d. PV Inflow (40,000 x 4.4941) 179764.00

Divided by 160000.00
Profitability Index 1.12

e. Since the payback cut off point is 3 years and the calculated payback was 4 years
the company should not purchase the car wash
Problem 4

Net Investment 1200000.00

Year Cash Inflow to Cumulative

Net Cash Flow Salvage Value To be Recovered
Date Payback
1.00 360000.00 360000.00 240000.00 600000.00 600000.00 1.00
2.00 480000.00 840000.00 120000.00 960000.00 240000.00 1.00
3.00 240000.00 1080000.00 60000.00 1140000.00 60000.00 1.00
4.00 180000.00 1260000.00 24000.00 1284000.00 -84000.00 0.53
Bail Out Period 3.53

Cost of Investment 1200000.00

Less: Cash inflow to date prior to excessive recovery 1080000.00
Total 120000.00
Less: Salvage Value on the year unknown period is unknown 24000.00
Total 96000.00
Divided by: Cash inflow during the unknown period 180000.00
Unkown Period 0.53