Assignment on Accounting for Business Doc

Added on - 22 Jul 2020

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Accounting for Business
Table of ContentsQUESTION 1..................................................................................................................................1QUESTION 2..................................................................................................................................2QUESTION 3..................................................................................................................................3QUESTION 4..................................................................................................................................4QUESTION 5..................................................................................................................................4REFERENCES................................................................................................................................6Index of TablesYTable 1Calculation of cash inflows................................................................................................1Table 2 Calculation of payback period............................................................................................1Table 3 Calculation of net present value.........................................................................................1Table 4 Calculation of accounting rate of return.............................................................................2Table 5Sales budget........................................................................................................................3Table 6Labor budget.......................................................................................................................3Table 7 Cash Flow Budget..............................................................................................................3
QUESTION 1Delcom Chemical has an investment opportunity to purchase a new business; itsquantitative analysis through capital budgeting method is performed as follows:TableCalculation of cash inflowsYearProfitDepreciationCash inflow1$ 200,000.00$ 160,000.00$ 360,000.002$ 210,000.00$ 160,000.00$ 370,000.003$ 300,000.00$ 160,000.00$ 460,000.004$ 320,000.00$ 160,000.00$ 480,000.005$ 340,000.00$ 160,000.00$ 500,000.00$ 1,370,000.00$ 800,000.00$ 2,170,000.00Table Calculation of payback periodYearCash flowCumulative cash flows1$ 360,000.00$ 360,000.002$ 370,000.00$ 730,000.003$ 460,000.00$ 1,190,000.004$ 480,000.00$ 1,670,000.005$ 500,000.00$ 2,170,000.00Paybackperiod=2year+($800,000$730,000)/$460,000¿2year2monthsTable Calculation of net present valueYearCash flowDiscounting factor@13%Discounted cash flows1$ 360,000.000.8850$ 318,584.072$ 370,000.000.7831$ 289,764.273$ 460,000.000.6931$ 318,803.074$ 480,000.000.6133$ 294,392.995$ 500,000.000.5428$ 271,379.97Total cash inflows$ 1,492,924.38Less: Initial investment$ 800,000.00Net present value$ 692,924.38|Page
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