Sunday, January 26, 2014

Responsibility Centers and Financial Control

1. Calculation of total initial outflowCost of lift = $2,000,000Cost of installation = $1,300,000Total initial outflow (Io) = $3,300,000 yearbook funds influxs and outflows forward disparagement are the resembling apiece year yearbook notes inflow = estimate of days x number of tickets x price per ticket= 40 x 300 x 55 = $660,000 yearbook currency outflow = number of days x cost per day= 200 x 500 = $100,000Net one-year cash flow (Ia) = Annual cash inflow - Annual cash outflow = $560,000Present look upon of $1 at a price reduction outrank of 14% for 0 years = PVo = 1.0000Present cling to of annuity of $1 at a discount rate of 14% for 20 years = polyvinyl acetate = 6.6231Cash flowIa/Io in $polyvinyl acetate/PVoPresent assess in $Net annual cash flow560,0006.6231 3,708,936Total initial outflow-3,300,0001.0000-3,300,000Net Present Value 408,936Since the before tax income NPV is positive at the given discount rate of 14% adding the lift bequeat hBe a profitable investment. 2. Net annual cash flow before tax (Ia)= Annual cash inflow - Annual cash outflow = $560,000Total initial outflow (Io) = $3,300,000Tax rate = 40%Annual cash act of operations excluding derogation = I1 = Ia*(1 ? 0.4) = $336,000Cash effect of depreciation: redeeming(a) of income taxes = I2 = Io*0.4 = $1,320,000Present value of annuity of $1 at a discount rate of 8% for 20 years = PV1 = 9.8181Present value of 10 year MARCS depreciation at a discount rate of 8% = PV2 = 0.7059Cash flowI in $PVPresent Value in $Annual cash effect of operations excluding depreciation336,0009.8181 3,298,882Cash effect of depreciation: saving of income taxes1,320,0000.7059 931,788Total after tax effect on cash 4,230,670Total initial outflow-3,300,0001.0000-3,300,000Net Present Value 930,670Since the after tax NPV is positive at the given discount rate of 8% adding the lift will be a profitable investment. 3. The higher up analytic thinking tells us that the investment in the lift is... ! the look into root does not have a start, a spiritualist and an sack and lacks conclusion along with references.. needs a slight bend more improvement If you want to get a productive essay, order it on our website: OrderCustomPaper.com

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