Saturday, March 9, 2019
Accounting Assignment Week 5
16-1, 16-2, 16-3, 16-5 Exercise 16-1Identifying exchange inflows and outflows Indicate which of the following items result result in specie inflows and which will result in change outflows. The first one is shown as an example. Initial investment Outflow alleviate determines Inflow Recovery of working capital Inflow additive expenses Outflow Working capital commitments Outflow Costsavings Inflow Incremental tax revenue Inflow Exercise 16-2Determining the chip in think of of a lump-sum future cash receipt Stan Sweeney turned 20 stratums old today. His grandfather completed a trust fund that will pay Mr. Sweeney $80,000 on his abutting birthday. However, Stan needs money today to start his college education. His father is willing to champion and has agreed to concur Stan the present value of the future cash inflow, assuming a 10 percent station of return. Required A. Use a present value table to determine the amount of cash that Stan Sweeneys father should give h im.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 of The Present Value, Stan Sweeneys father should give him $72,727. 20 B. ) Use an algebraic formula to prove that the present value of the trust fund (the amount of cash computed in Requirement a) is equalise 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 = $80,000Exercise 16-3Determining 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. Bittners employer has crackinged an early retirement inducing 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 benefi t is the however consideration in making the retirement deci- sion, should Ms. Bittner accept her employers offer? Ms. Bittner should not accept the her employers 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 change the present value of the retirement benefit. Taxes is another factor that could affect the present value of the retirement benefit. Exercise 16-5Determining dismiss present value tube Shuttle Inc. is considering investing in two new vans that are pass judgment to generate com- bined cash inflows of $28,000 per year. The vans combined purchase price is $91,000. The ex- pected life and save up value of each are four years and $21,000, respectively.Metro Shuttle has an middling be of capital of 14 percent Required a. Calculate the net present value of the investment opportunity. Present Value FV X stick VALUE = Present Value Equivalent time period 1 28,000 X 0. 8771 93 $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 anticipate 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.