# Complete Financial Discussion Responses, Accounting Assignment Homework Help

CLASSMATE POST 1:

1. Depreciation is charged by the Company, as it helps in reduction of income and subsequently sreduces the taxes of the Company, Depreciation is calculated as:

Calculate depreciation:

Depreciation = (400,000 – 50,000)/10

Depreciation = 35,000 every year

2. Calculate net income:

Net income is calculated after deducting expenses and depreciation from revenue

 S.No Particulars Amount (\$) 1 Increase In Revenue 330,000 2 Less: Expenses (165,000) 3 Incremental Revenue 165,000 4 Less: Depreciation (35,000) 5 Net Cash Flows after Depreciation 130,000 6 Less: Income Tax @ 60% (78,000) 7 Anticipated Income 52,000

Expenses are increasing by 165000 every year

Note:

Depreciation value is derived from calculation no-1

3. Calculate annual Net cash flows:

Annual net cash flows are the sum of the net income and depreciation as depreciation deducted is not paid to any one:

 S. No Particulars Amount (\$) 1 Increase In Revenue 330,000 2 Less: Expenses 165,000 3 Incremental Revenue 165,000 4 Less: Depreciation 35,000 5 Net Cash Flows after Depreciation 130,000 6 Less Income Tax @ 60% 78,000 7 Anticipated Income 52,000 8 Add: Depreciation 35,000

CLASSMATE POST 2:

Problem 12-61, pg. 483

 Cash cost of new equipment now Y400,000 Estimated life in years 10 Terminal salvage value Y 50,000 Incremental revenues per year Y 330, 000 Incremental expenses per year other than depreciation Y 165,000

1. Depreciation expenses per year

Asset = Cash cost of new equipment – terminal salvage value

Y 400,000 – Y 50,000 = Y350,000

Depreciation expense per year = asset/terminal salvage value

Y 350,000/10yrs = Y35,000

2. Anticipated net income per year

Income before taxes = revenues – depreciation expense – incremental expenses

Y 330,000 – Y35,000 – Y 165,000 = 130,000

Income taxes = income taxes X flat rate

Y 130,000 X .6 = Y78,000

3. Annual net cash flow

Pretax cash inflow = revenues – incremental expenses

Y 330,000 – Y 165,000 = Y135,000

After-tax cash inflow = pretax cash inflow X (1 – tax rate)

Y 35,000 X .6 = Y 21,000

After-tax effect on cash = after-tax cash inflow + tax savings due to depreciation

Y54,000 + Y 21,000 = Y 75,000

4. Payback period

Payback period = initial incremental amount invested / annual incremental cash inflow

Y 400,000 / Y 54,000 = 7.40 years

5. ARR on initial investment

Y 75,000 – Y 35,000 / Y 400,000 = Y40,000 / Y400,000 = 0.10 or 10%

6. NPV

Y 75,000 X 10 X .14 –Y 35,000 = Y70,000