Department

Financial AccountingCourse Code

MGAB03H3Professor

G.Quan FunLecture

2This

**preview**shows pages 1-3. to view the full**11 pages of the document.**MANAGEMENT

ACCOUNTING

Chapter 12

IN-CLASS

QUESTIONS (ICQs)

SOLUTION

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

ICQ #1

12.26 NPV, IRR, ARR and Payback Methods - Amaro Clinic

A. The net present value is ($5,000 x 5.2161) - 20,000 = $6,080

B. The factor for the internal rate of return must be

20,000 = $5,000*Factor

Factor = 4.0

From the PVFA tables for 10 year, it would be just over 20% (PVFA = 4.192)

Using Excel’s IRR function, the rate is 21.4%

C. Assuming straight-line amortization, the earnings will be

$5,000 - $20,000/10 = $3,000

The accounting rate of return is $3,000/20,000 = 15%

D. The payback period is $20,000/$5,000 = 4 years

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

ICQ #2

12.27 NPV, ARR and Payback Methods – Moosehead Community Centre

A sample spreadsheet showing the calculations for this problem is available on the Instructor’s

web site for the textbook (available at www.wiley.com/canada/eldenburg).

A.

###### You're Reading a Preview

Unlock to view full version