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    Regular Flow Irregular Flow Irregular Flow Depreciation

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    ssregens82
    The company invests $500 in an asset with a 5 year life and $30 salvage value. The annual net cash inflow is $180. In year 3, a $10 repair is required. Tax rate is 35% and discount rate is 8%. To calculate NPV and IRR: determine after-tax cash flows using tax rate of 35%; discount cash flows using 8% rate; sum discounted cash flows to get NPV of $87.45; calculate IRR using goal seek function of 13.40445%.

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    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd

    Regular Flow Irregular Flow Irregular Flow Depreciation

    Uploaded by

    ssregens82
    135 views1 page
    The company invests $500 in an asset with a 5 year life and $30 salvage value. The annual net cash inflow is $180. In year 3, a $10 repair is required. Tax rate is 35% and discount rate is 8%. To calculate NPV and IRR: determine after-tax cash flows using tax rate of 35%; discount cash flows using 8% rate; sum discounted cash flows to get NPV of $87.45; calculate IRR using goal seek function of 13.40445%.

    Original Description:

    cost accounting

    Original Title

    Tax Problem

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    © Attribution Non-Commercial (BY-NC)

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    The company invests $500 in an asset with a 5 year life and $30 salvage value. The annual net cash inflow is $180. In year 3, a $10 repair is required. Tax rate is 35% and discount rate is 8%. To calculate NPV and IRR: determine after-tax cash flows using tax rate of 35%; discount cash flows using 8% rate; sum discounted cash flows to get NPV of $87.45; calculate IRR using goal seek function of 13.40445%.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    135 views1 page

    Regular Flow Irregular Flow Irregular Flow Depreciation

    Uploaded by

    ssregens82
    The company invests $500 in an asset with a 5 year life and $30 salvage value. The annual net cash inflow is $180. In year 3, a $10 repair is required. Tax rate is 35% and discount rate is 8%. To calculate NPV and IRR: determine after-tax cash flows using tax rate of 35%; discount cash flows using 8% rate; sum discounted cash flows to get NPV of $87.45; calculate IRR using goal seek function of 13.40445%.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
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    AMIS 525

    Investment Decision with Income Taxes and Time Value

    A company invests in a depreciable asset with a five year life and cost
    of $500. Salvage value is expected to be $30.
    The annual net operating inflow is expected to be $180.
    At time point 3, a repair will cost $10. Working capital is estimated at $60.
    The tax rate [tr] is 35% and the time value of money rate [ir] is 8%.
    What is the NPV and IRR of this project?

    tax factor >>

    t
    0
    0
    1
    2
    3
    4
    5

    [1 - tr]

    [1 - tr]

    tr

    regular flow

    irregular flow

    irregular flow

    depreciation

    $180
    $180
    $180
    $180
    $180

    ($10)

    tr

    35.00%

    $30

    $60

    ($500.00)
    ($60.00)
    $94
    $94
    $94
    $94
    $94

    TVF

    irr =

    1/9/2014

    At

    ($560.00)
    $149.90
    $149.90
    $143.40
    $149.90
    $229.40
    $262.50
    13.40445%

    1 / ((1 + ir ) ^ t)

    1.00000
    0.92593
    0.85734
    0.79383
    0.73503
    0.68058
    NPV
    ir

    100.00% 35.00%

    ($560.0000)
    $138.7963
    $128.5151
    $113.8355
    $110.1810
    $156.1258
    $87.4537
    8.000%

    total

    < ======= after tax amounts ======== >

    ($500)
    ($60)

    exact irr calculation


    t
    0
    1
    2
    3
    4
    5
    Sum

    65.00% 65.00%

    $117.00
    $117.00
    $117.00 ($6.50)
    $117.00
    $117.00 $19.50

    $60.00

    $32.90
    $32.90
    $32.90
    $32.90
    $32.90

    ($500.00)
    ($60.00)
    $149.90
    $149.90
    $143.40
    $149.90
    $229.40

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