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Custom Straight Line Method Essay

In this question, we have to calculate the depreciation and the book value at the end of four years. The calculation along with the data is mentioned below, using Straight Line method

Depreciation Straight Line Method

 

 

Cost

26,000

Life

15

Salvage Value

2000

 

 

End of 4 Years Depreciation

6400

 

 

Book Value

19,600

 

 

We have to calculate the depreciation and the book value at the end of four years. The calculation along with the data is mentioned below, using sum of year’s digit method

Sum of Years Digit Method

 

 

Cost

26,000

Life

15

Salvage Value

2000

Sum of Years

120

1st year %

0.125

2nd year %

0.12

3rd year %

0.11

4th year %

0.1

 

 

1st Year Depreciation

3000

1st Year Depreciation

2800

1st Year Depreciation

2600

1st Year Depreciation

2400

 

 

End of 4 Years Depreciation

10800

 

 

Book Value

15,200

 

 

Double declining method depreciation computation is mentioned below,

Double Declining Balance Method

 

 

Cost

26,000

Life

15

Salvage Value

2000

Depreciation Total

1600

Double Declining %

0.133

1st year

3200

2nd Year

2773.3

3rd Year

2403.6

4th Year

2083.08

 

 

End of 4 Years Depreciation

10459.97

 

 

Book Value

15,540

Ans-2)

NPV and IRR analysis of Type A Project is mentioned below,

Type A

Life = 12 Years

Inflow of Earnings

Net Present Value

 

 

 

1

-220,000

 

2

56,800

51636.36

3

56,800

46942.15

4

56,800

42674.68

5

56,800

38795.16

6

56,800

35268.33

7

56,800

32062.12

8

56,800

29147.38

9

56,800

26497.62

10

56,800

24088.74

11

56,800

21898.86

12

56,800

19908.05

 

 

368919.47

 

 

 

Project Feasibility Positive NPV

 

148919.5

IRR

 

23%

NPV and IRR analysis of Type B Project is mentioned below,

Type B

Life = 12 Years

Inflow of Earnings

Net Present Value

 

 

 

1

-300,000

 

2

60,120

54654.55

3

60,120

49685.95

4

60,120

45169.05

5

60,120

41062.77

6

60,120

37329.79

7

60,120

33936.17

8

60,120

30851.07

9

60,120

28046.42

10

60,120

25496.75

11

60,120

23178.86

12

60,120

21071.69

 

 

390483.07

 

 

 

Project Feasibility Positive NPV

 

90483.1

IRR

 

16%

NPV and IRR analysis of Type C Project is mentioned below,

Type C

Life = 24 Years

Inflow of Earnings

Net Present Value

 

 

 

1

-550,000

 

2

84,600

76909.09

3

84,600

69917.36

4

84,600

63561.23

5

84,600

57782.94

6

84,600

52529.94

7

84,600

47754.49

8

84,600

43413.18

9

84,600

39466.52

10

84,600

35878.66

11

84,600

32616.96

12

84,600

29651.78

13

84,600

26956.17

14

84,600

24505.61

15

84,600

22277.82

16

84,600

20252.57

17

84,600

18411.42

18

84,600

16737.66

19

84,600

15216.05

20

84,600

13832.78

21

84,600

12575.25

22

84,600

11432.05

23

84,600

10392.77

24

84,600

9447.97

 

 

549482.16

 

 

 

Project Feasibility Positive NPV

 

-517.8

IRR

 

15%

Type A project will be most beneficial for the company as compared to other projects because of its higher NPV and IRR.

Custom Straight Line Method Essay

Code: Sample20

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