Type: Analysis
Pages: 2 | Words: 443

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.

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