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Running head: ACCOUNTING
Accounting
Name of the Student:
Name of the University:
Author’s Note:

1ACCOUNTING
Table of Contents
Answer to PART A:.........................................................................................................................2
Requirement a:.............................................................................................................................2
Requirement b:.............................................................................................................................2
Requirement c:.............................................................................................................................2
Requirement d:.............................................................................................................................3
Requirement e:.............................................................................................................................3
Requirement f:.............................................................................................................................4
Answer to PART B:.........................................................................................................................4
Answer to Question 1:.................................................................................................................4
Answer to Question 2:.................................................................................................................5
Answer to Question 3:.................................................................................................................6
Answer to Question 4:.................................................................................................................7
Bibliography:...................................................................................................................................8

2ACCOUNTING
Answer to PART A:
Requirement a:
Particulars Amount
Deposit Amount A $25,000.00
Interest Rate p.a. B 5%
Period C 3
Compounding Period p.a. D 1
Total Compounding Period E=CxD 3
Future Value after 3 years F=Ax(1+B)^E $28,940.63
Requirement b:
Particulars Amount
Deposit Amount A $25,000.00
Interest Rate p.a. B 24%
Period C 3
Compounding Period p.a. D 1
Total Compounding Period E=CxD 3
Future Value after 3 years F=Ax(1+B)^E $47,665.60
Requirement c:
Particulars Amount
Required Amount A $8,000.00
Interest Rate p.a. B 3%
Period C 4
Compounding Period p.a. D 1
Total Compounding Period E=CxD 4
Present Value of Deposit F=A/(1+B)^E $7,107.90

3ACCOUNTING
Requirement d:
Particulars Amount
1st Installment A $6,00,000.00
Interest Rate p.a. B 6%
Period C 3
Compounding Period p.a. D 1
Total Compounding Period E=CxD 3
Present Value of 1st
Installment F=A/(1+B)^E $5,03,771.57
2nd Installment G $8,00,000.00
Interest Rate p.a. H 6%
Period I 5
Compounding Period p.a. J 1
Total Compounding Period K=IxJ 5
Present Value of 2nd
Installment L=G/(1+H)^K $5,97,806.54
Payment from Bank Today M=F+L $11,01,578.11
Requirement e:
Particulars Amount
Annual Withdrawal A $15,000.00
Interest Rate p.a. B 5%
Period C 12
Compounding Period p.a. D 1
Total Compounding Period E=CxD 12
Present Value of Deposit
F=Ax[{1-
(1+B)^-E}/B] $1,32,948.77

4ACCOUNTING
Requirement f:
Particulars Amount
Annual Withdrawal after
Retirement A $1,50,000.00
Rate of Return p.a. B 4%
Expected Lifespan after
Retirement C 25
Compounding Period p.a. D 1
Total Compounding Period E=CxD 25
Fund Required at the time
of Retirement
F=Ax[{1-
(1+B)^-E}/B] $23,43,311.99
Return Rate on Investment
p.a. G 6%
Investment Period H 30
Compounding Period p.a. I 1
Total Compounding Period J=CxD 30
Required Annual
Investment
K=(FxG)/[(1
+G)^J-1] $29,640.35
Answer to PART B:
Answer to Question 1:
Furnace A:
Particulars 0 1 2 3 4 5 6 7 8 9 10
Installed Capital Cost of
Equipment -$25,00,000
Expected Additional Annual
Fuel Savings $14,00,000 $14,00,000 $14,00,000 $14,00,000 $14,00,000 $14,00,000 $14,00,000 $14,00,000 $14,00,000 $14,00,000
Annual Operating &
Maintenance Expenses -$7,50,000 -$7,50,000 -$7,50,000 -$7,50,000 -$7,50,000 -$7,50,000 -$7,50,000 -$7,50,000 -$7,50,000 -$7,50,000
Annual Utility Expenses -$3,50,000 -$3,50,000 -$3,50,000 -$3,50,000 -$3,50,000 -$3,50,000 -$3,50,000 -$3,50,000 -$3,50,000 -$3,50,000
Net Cash Flow -$25,00,000 $3,00,000 $3,00,000 $3,00,000 $3,00,000 $3,00,000 $3,00,000 $3,00,000 $3,00,000 $3,00,000 $3,00,000
MARR 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%
Discounted Cash Flow -$25,00,000 $2,83,019 $2,66,999 $2,51,886 $2,37,628 $2,24,177 $2,11,488 $1,99,517 $1,88,224 $1,77,570 $1,67,518
Net Present Value -$2,91,974
IRR 3.46%
Period

5ACCOUNTING
Furnace B:
Particulars 0 1 2 3 4 5 6 7 8 9 10
Installed Capital Cost of
Equipment -$55,00,000
Expected Additional Annual
Fuel Savings $20,25,000 $20,25,000 $20,25,000 $20,25,000 $20,25,000 $20,25,000 $20,25,000 $20,25,000 $20,25,000 $20,25,000
Annual Operating &
Maintenance Expenses -$8,75,000 -$8,75,000 -$8,75,000 -$8,75,000 -$8,75,000 -$8,75,000 -$8,75,000 -$8,75,000 -$8,75,000 -$8,75,000
Annual Utility Expenses -$2,90,000 -$2,90,000 -$2,90,000 -$2,90,000 -$2,90,000 -$2,90,000 -$2,90,000 -$2,90,000 -$2,90,000 -$2,90,000
Net Cash Flow -$55,00,000 $8,60,000 $8,60,000 $8,60,000 $8,60,000 $8,60,000 $8,60,000 $8,60,000 $8,60,000 $8,60,000 $8,60,000
MARR 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%
Discounted Cash Flow -$55,00,000 $8,11,321 $7,65,397 $7,22,073 $6,81,201 $6,42,642 $6,06,266 $5,71,949 $5,39,575 $5,09,033 $4,80,220
Net Present Value $8,29,675
IRR 9.08%
Period
As the net present value of Furnace A is negative and Furnace B has positive net present
value, it is better to choose Furnace B.
Answer to Question 2:
Machine A:
Particulars 0 1 2 3 4 5
Net Cash Flow -$54,000 $18,000 $18,000 $18,000 $18,000 $18,000
MARR 4% 4% 4% 4% 4% 4%
Discounted Cash Flow -$54,000 $17,308 $16,642 $16,002 $15,386 $14,795
Cumulative Discounted Cash
Flow -$54,000 -$36,692 -$20,050 -$4,048 $11,338 $26,133
Discounted Payback Period 3.26
Net Present Value $26,133
Period

6ACCOUNTING
Machine B:
Particulars 0 1 2 3 4 5
Net Cash Flow -$38,745 $13,500 $13,500 $13,500 $13,500 $13,500
MARR 4% 4% 4% 4% 4% 4%
Discounted Cash Flow -$38,745 $12,981 $12,482 $12,001 $11,540 $11,096
Cumulative Discounted Cash
Flow -$38,745 -$25,764 -$13,283 -$1,281 $10,259 $21,355
Discounted Payback Period 3.11
Net Present Value $21,355
Period
Machine B has shorter discounted payback period than Machine B. Hence, considering
discounted payback period, the company should select Machine B.
However, Machine A has higher net present value. Therefore, in this case, it is better to
select Machine A.
Answer to Question 3:
Particulars Amount
Operating Hours per annum A 1200
Cost of New Jet B $18,50,000
Fixed Cost C $2,00,000
Variable Cost per hour D $300
Total Variable Cost per annum E=AxD $3,60,000
Total Annual Cost F=C+E $5,60,000
MARR G 6%
Expected Life of Jet H 5
Annuity Factor
I=[1-
{1/(1+G)^H}]/G 4.2124
Annual Equivalent Cost J=(B/I)+F $9,99,183.34
Cost per Hour K=J/A $832.65

7ACCOUNTING
Answer to Question 4:
Unit Depletion Rate:
Particulars Amount
Production bbls/Year:
1 87500
2 175000
3 262500
4 350000
5 350000
6 315000
7 262500
8 210000
9 175000
10 87500
Total Production A 2275000
Cost of Steam generators &
Computer Controls B $50,00,000
Other Equipment &
Infrastructure Cost C $15,00,000
Total Depletion Base D=B+C $65,00,000
Unit Depletion Rate per Barrel E=D/A $2.86
Depletion Allowance:
Year Production
Unit Depletion
Rate
Depletion
Allowance
A B C=AxB
1 87500 $2.86 $2,50,000.00
2 175000 $2.86 $5,00,000.00
3 262500 $2.86 $7,50,000.00
4 350000 $2.86 $10,00,000.00
5 350000 $2.86 $10,00,000.00
6 315000 $2.86 $9,00,000.00
7 262500 $2.86 $7,50,000.00
8 210000 $2.86 $6,00,000.00
9 175000 $2.86 $5,00,000.00
10 87500 $2.86 $2,50,000.00
Total Production 2275000 $65,00,000.00

8ACCOUNTING
Bibliography:
Brooks, R., 2015. Financial management: core concepts. Pearson.
Chan, K. and Rate, E.A.I., 2018. & 6 The Time Value of Money. Financial Management
Peirson, G., Brown, R., Easton, S. and Howard, P., 2014. Business finance. McGraw-Hill
Education Australia
Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and
applications. Pearson
Xingyun, P.E.N.G., 2015. Time Value of Money. World Scientific Book Chapters, pp.49-70.