FM 101/ CAE103:FI

NANCI
ALMANAGEMENT
Lear
ningModul
e5:Capi
talBudget
ing-
Tradi
ti
onalPr
ojectEval
uat
ionTechni
ques

LEARNI
NGASSESSMENT1

JohnHar
oldBel
tr
anDr
amayoBSAI
I

1.Acompanypl anst
obuyanequi pmentf
orP500000,
andtheequipmenti
sexpect
edto
generateaft
ertaxnetcashi
nfl
owsofP100000peryear
,thepaybackper
iodandpayback
reci
procalare?

PaybackPer
iod=NetCostofInvest
ment
/Af
terTaxCashf
lows
=500,000/
100,000
=5years

PaybackReci
procal
=Aft
erTaxCash/CostofI
nvest
ment
=1/5
=0.
20or20%

2.Aproj
ectr
equi
resani
nvest
mentofP600000with5year
susef
ull
if
e,nosal
vageval
ueand
usesst
rai
ghtl
inemet
hodofdepr
eci
ati
on.Ot
herdat
aare:

Expect
edsal
esr
evenue P2000000 Out
-of
-pocketcosts P1600000
TaxRate 40% Addi
ti
onalWorkingCapi
tal 500000

a.ComputethepaybackPeriod
PaybackPer
iod=NetCostofInvest
ment
/Af
terTaxCashf
lows
=2700000/1248000
=2.163years

b.Comput
ethepaybackReci
procal

PaybackReci
procal
=Aft
erTaxCashf
lows/CostofI
nvest
ment
=1/2.16346
=46.
22%

3.Ani
nvest
mentofP400000canbr
ingt
hef
oll
owi
ngannualcashi
ncome,
netoft
ax:

Year1 40000 Year2 95000 Year3 85000

Year4 160000 Year5 86000 Year6 70000
 a.Comput ethepaybackPer i
od
CashOutfl
ows 400,
000.00
CashInfl
ows
Year1400, 000.00 40,000.00 360, 000.00
Year2360, 000.00 95,000.00 265, 000.00
Year3265, 000.00 85,000.00 180, 000.00
Year4180, 000.00 160,000.00 20,000.00
20,000.00 86, 000.00 -
PaybackPer i
od:4+(
20,
000/ 86,
000)
=4+. 233
=4.233years

b.ComputethepaybackRecipr
ocal
PaybackReci
procal
=AfterTaxCashfl
ows/CostofI
nvest
ment
=1/4.233
=23.62%

4.Ani
nvest
mentofP500000canbr
ingquar
ter
lycashi
nfl
owandr
esi
dualval
uesasf
oll
ows:

Resi
dualVal
ues,endof
NetCashI
nfl
ows quar
ter

Quar
ter1 130000 230000
Quar
ter2 90000 100000
Quar
ter3 85000 40000
Quar
ter4 160000 20000
Quar
ter5 75000 10000
Quar
ter6 70000 5000

Det
ermi
net
hepaybackbai
l-
outper
iod.

B-
Oquar
ter
s

0.
33*
Tot
alBai
l-
outquar
ter 4.
33
q\
or1yearandr
oughly1mont
h.
*Fr
act
ionoft
hef
if
thquar
ter=Balanceneededinquar
ter5/NetOper
ati
ngCIinquar
ter5
=35,000-10,000/75,
000
=25,000/75,
000
=.33
 5.Acompanyi spl anningtoacqui r
eanewmachi nethatwi llcostP600000.Thi smachi neis
expectedt ogener atenetincomeofP120000peryear .Nosal vagevalueisexpectedt obe
recoveredatt heendofi tsusefulli
feoftenyears.Whati stheaccount ingrateofreturnforthi
s
projectusingt heorigi
nalandaver agemet hods?
Accounti
ngRat eofRet urn=NetI ncome/I nvestment
=12,000/60,000
=0.2or20%
AccountingRat eofRet urnbasedonaver agei nvestment=NetI ncome/Aver ageI nvest
ment
=12, 000/( 60,000+0/2)
=12, 000/30, 000
=0.4or40%
6.TheTar lacCompanyi sconsider
ingthepr oducti
onofanewpr oductli
newhi chwillrequir
ean
investmentofP3000000wi t
hP200000r esi
dualvalue.Thei nvestmentwi l
lhaveausef ulli
fe
of10year sdur ingwhi channualcashi nfl
owsbef or
eincomet axesofP1400000ar eexpected.
Thei ncomet axr ateis40%.

a.Comput ef
ortheannualneti
ncome
IncomeBeforeTaxes 1,
400,
000
Less:Depr
eciati
onExpense 280,
000(3M-
200,
000/
10)
IncomeBef or
eIncomeTax 1,
120,
000
Less:Tax(40%) 448,
000
Profi
t(AnnualNetIncome) 672,
000

b.ComputefortheAccounti
ngr ateofretur
n( ori
ginal
)
ARRori
ginal=NetIncome/ CostofInvest
ment
=672,000/3,000,
000
=22.45%
c.ComputefortheAccounti
ngr ateofretur
n( average
ARRaverage=NetI ncome/((CostofInvestment+SalvageVal
ue)
/2)
=672,000/((
3,000,000+200,000)/2)
=672,000/1,
600,000
=42%

SorryMa'am DeanAl
wayskonagpassedogr
equi
rement
slat
e!!
!!
!Pr
omi
seIwi
llnotdoi
tagai
nint
he
year2021!!
!!

Nagubaakongphonet
henmaot
onggi
paundangkonipudr
a,per
odi
likooyyypadayunCPAko!
!!
!!

Nomor
echi
cka!
!!kaymakahi
lakkonansuperhahaha!
!

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