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    Mary Ann V. Domincel Management Accounting and Control 2 BSA-4

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    MA Valdez
    The document discusses two investment projects using discounted cash flow analysis. It calculates the net present value (NPV), internal rate of return (IRR), payback period and minimum cash flow needed to justify investment for each project using formulas. Project 1 has a positive NPV of $31,981 and IRR of 21.5%, while Project 2 has a negative NPV of -$7,451.93 and IRR of 19.6%. The discounted payback period is also calculated for each project.

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    Mary Ann V. Domincel Management Accounting and Control 2 BSA-4

    Uploaded by

    MA Valdez
    34 views5 pages
    The document discusses two investment projects using discounted cash flow analysis. It calculates the net present value (NPV), internal rate of return (IRR), payback period and minimum cash flow needed to justify investment for each project using formulas. Project 1 has a positive NPV of $31,981 and IRR of 21.5%, while Project 2 has a negative NPV of -$7,451.93 and IRR of 19.6%. The discounted payback period is also calculated for each project.

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    The document discusses two investment projects using discounted cash flow analysis. It calculates the net present value (NPV), internal rate of return (IRR), payback period and minimum cash flow needed to justify investment for each project using formulas. Project 1 has a positive NPV of $31,981 and IRR of 21.5%, while Project 2 has a negative NPV of -$7,451.93 and IRR of 19.6%. The discounted payback period is also calculated for each project.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    34 views5 pages

    Mary Ann V. Domincel Management Accounting and Control 2 BSA-4

    Uploaded by

    MA Valdez
    The document discusses two investment projects using discounted cash flow analysis. It calculates the net present value (NPV), internal rate of return (IRR), payback period and minimum cash flow needed to justify investment for each project using formulas. Project 1 has a positive NPV of $31,981 and IRR of 21.5%, while Project 2 has a negative NPV of -$7,451.93 and IRR of 19.6%. The discounted payback period is also calculated for each project.

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    of 5

    MARY ANN V.

    DOMINCEL MANAGEMENT ACCOUNTING AND CONTROL 2


    BSA-4

    1 2 3 4 5 6

    Q1. 1.08 0.9259 0.8573 0.7938 0.7350 0.6806 0.6302 4.6228


    108159.557
    108159.557
    92729.38 85860.54 73611.57 68158.86
    Test 100147.738 7 4 79500.503 7 8 500008.616
    MARY ANN V. DOMINCEL MANAGEMENT ACCOUNTING AND CONTROL 2
    BSA-4

    .Minimum cash flow needed to justify the investment =


    Investment Value / Total of Discounted value of 1
    Investment value = 500,000
    Discounted Value of 1 = 1 / (1 + r)^n
    r = Cost of Capital (or) Discount Rate, n = period (Year 1, Year
    2......)
    Total Discounted Value of 1 = 1 / (1 + 0.08)^1 + 1 / (1 + 0.08)^2 +
    1 / (1 + 0.08)^3 + 1 / (1 + 0.08)^4 + 1 / (1 + 0.08)^5 + 1 / (1 +
    0.08)^6
    Total Discounted Value of 1 =0.9259 + 0.8573 + 0.7938 + 0.7350
    + 0.6806 + 0.6302
    Total Discounted Value of 1 = 4.6228

    Minimum cash flow needed to justify the investment = 500,000 /


    4.6228 = 108,159.53
    MARY ANN V. DOMINCEL MANAGEMENT ACCOUNTING AND CONTROL 2
    BSA-4

    Q2.
    MARY ANN V. DOMINCEL MANAGEMENT ACCOUNTING AND CONTROL 2
    BSA-4

    Cash
    Q3. Flows Year 1 Year 2 Year 3 Year 4 Year 5 TOTAL
    Project 1 200000 100000 150000 100000 50000 600000
    Project 2 50000 50000 100000 200000 237500 637500

    Discounte
    d Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NPV ARR
    Project 1 -425000 178571.43 79719.39 106767.04 63551.81 28371.34 31981.00 21.5%
    -
    - 166709.1
    Balance -425000 246428.57 8 -59942.15 3609.66 31981.00    
                     
    127103.6
    Project 2 -425000 44642.86 39859.69 71178.02 2 134763.88 -7451.93 19.6%
    - -
    - 340497.4 - 142215.8
    Balance -425000 380357.14 5 269319.42 1 -7451.93    

    Discounte
    d Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NPV ARR
    100000.0 100000.0 175000.0
    Project 1 -425000 200000.00 0 150000.00 0 50000.00 0 28.2%
    -
    - 125000.0 125000.0
    Balance -425000 225000.00 0 25000.00 0 175000.00    
                     
    200000.0 212500.0
    Project 2 -425000 50000.00 50000.00 100000.00 0 237500.00 0 30.0%
    -
    - 325000.0 -
    Balance -425000 375000.00 0 225000.00 -25000.00 212500.00    
    Answers
    3. NPV
    Project 1: 31,981
    Project 2: - 7,451.93

    Undiscounted
    Payback Period
    Project 1: 3 Years
    Project 2: 5 Years

    ARR
    Project 1: 28.2 %
    MARY ANN V. DOMINCEL MANAGEMENT ACCOUNTING AND CONTROL 2
    BSA-4

    Project 2: 30 %

    Discounted
    Payback Period
    Project 1: 4 Years
    Project 2: More than 5 Years

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