Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 16, Problem 16.5ME
Mini-Exercise 16.5
LO 7
Net present ratio and
Required:
Calculate the present value ratio of the new production equipment, and comment on the internal rate of
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Students have asked these similar questions
Question 4
Given the initial investment in a factory processing equipment as Ghc500,037. Let the
opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable
of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6th
year and Ghc53400 for the 7th year.
a. Find the Net Present Value (NPV)
b. Determine the Internal Rate of Return
c. Identify three ways in which the Net Present value is superior to the Internal Rate of
return as investment criteria
QUESTION 3
Answer the questions from the information provided. Where applicable, use the present value tables that
appear in the module guide.
3.1
REQUIRED
Calculate the following for both projects from the information provided below:
3.1.1 Payback Period (expressed in years, months and days)
3.1.2 Accounting Rate of Return on average investment (expressed to two decimal places).
INFORMATION
Mentos Ltd had to choose between two projects, Alpha and Beta, for which the following profits and net cash
inflows are forecast:
Year
1
2
3
4
Net profit per year
Alpha
R53 000
R53 000
R53 000
R53 000
Beta
R45 000
R65 000
R85 000
R95 000
Net cash inflow per year
Beta
Alpha
R128 000
R128 000
R128 000
R128 000
Each project requires an investment of R300 000. Both projects have no salvage value.
R120 000
R140 000
R160 000
R170 000
27
Which of the following should be included in the cash flow
projections for a new product?
I. Money already spent for research and development of
the new product
II. Capital expenditures for equipment to produce the new
product
II. Increase in working capital needed to finance sales of
the new product
V. Interest expense on the loan used to finance the new
product launch
Multiple Choice
II and III only
II and IV only
I, II, and III only
II, III, and IV only
I, II, III, and IV
None of the options are correct.
Chapter 16 Solutions
Accounting: What the Numbers Mean
Ch. 16 - Prob. 16.1MECh. 16 - Prob. 16.2MECh. 16 - Mini-Exercise 16.3 LO 2. 3 The make or buy...Ch. 16 - Prob. 16.4MECh. 16 - Mini-Exercise 16.5 LO 7 Net present ratio and IRR...Ch. 16 - Mini-Exercise 16.6 LO 9. 10 Payback period and...Ch. 16 - Exercise 16.7 LO 1 Application of cost terminology...Ch. 16 - Prob. 16.8ECh. 16 - Exercise 16.9 LO 2, 3 Sell or process further?...Ch. 16 - Exercise 16.10 LO 2. 3 Sell or process further?...
Ch. 16 - Exercise 16.11
LO 2 , 3
Accept special sales...Ch. 16 - Exercise 16.12
LO 2, 3
Accept special sales order?...Ch. 16 - Prob. 16.13ECh. 16 - Exercise 16.14
LO 2, 3
Target costing Rainbow...Ch. 16 - Exercise 16.15
LO 2. 3
The make or buy decision...Ch. 16 - Exercise 16.16
LO 2, 3
The make or buy decision...Ch. 16 - Prob. 16.17ECh. 16 - Prob. 16.18ECh. 16 - Prob. 16.19ECh. 16 - Prob. 16.20ECh. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Prob. 16.25ECh. 16 - Prob. 16.26ECh. 16 - Prob. 16.27PCh. 16 - Problem 16.28 LO 2, 3 Relevant costs, special...Ch. 16 - Problem 16.29 LO 2, 3 Continue or discontinue a...Ch. 16 - Prob. 16.30PCh. 16 - Prob. 16.31PCh. 16 - Prob. 16.32PCh. 16 - Prob. 16.33PCh. 16 - Prob. 16.34PCh. 16 - Prob. 16.35PCh. 16 - Prob. 16.36PCh. 16 - Prob. 16.38CCh. 16 - Capital budget expenditure analysis: Internet...
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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