I’m taking a personal finance class. We’re in the cash/liquid asset management chapter. I’m on the section where we’re learning to compare cash management alternatives (checking acct., MMDA, CD, MMMF,Bonds, T-bills, etc.)
When deciding to pick which "alternative" is best for oneself we should first compare interest rates using APY, and then more importantly the ♦After-tax Return♦
◘○◘○◘○◘○◘○◘○◘○◘
The book gives me a formula. We’re using calculators so the teacher hasn’t bothered to go over the pencil & paper version. I missed a day of class so if she went over how to find it with the calculator I won’t know until after the test.
*I understand how to use the [PV] [FV] [n] [I/Y] [PMT] buttons to find present value and annuities etc.
♦What do I need to do on the calculator to find the After-tax Return on an investment?♦

I’m taking a personal finance class. We’re in the cash/liquid asset management chapter. I’m on the section where we’re learning to compare cash management alternatives (checking acct., MMDA, CD, MMMF,Bonds, T-bills, etc.)
When deciding to pick which "alternative" is best for oneself we should first compare interest rates using APY, and then more importantly the ♦After-tax Return♦
◘○◘○◘○◘○◘○◘○◘○◘
The book gives me a formula. We’re using calculators so the teacher hasn’t bothered to go over the pencil & paper version. I missed a day of class so if she went over how to find it with the calculator I won’t know until after the test.
*I understand how to use the [PV] [FV] [n] [I/Y] [PMT] buttons to find present value and annuities etc.
♦What do I need to do on the calculator to find the After-tax Return on an investment?♦

Most Company has an opportunity to invest in one of two new projects. Project Y requires a 5,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a 5,000 investment for new machinery with a three-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year.

Project Y Project Z
Sales $ 360,000 $ 275,000
Expenses
Direct materials 50,400 34,375
Direct labor 72,000 41,250
Overhead including depreciation 129,600 123,750
Selling and administrative expenses 26,000 25,000
Total expenses 278,000 224,375
Pretax income 82,000 50,625
Income taxes (30%) 24,600 15,188
Net income $ 57,400 $ 35,437
______________________________________…

Requirement 1:
Compute each project’s annual expected net cash flows. (Omit the "$" sign in your response. Round your answer to the nearest dollar amount.)

Project Y Project Z
Net cash flow $
$

______________________________________…

Requirement 2:
Determine each project’s payback period. (Round your answer to 2 decimal places.)

Project Y Project Z
Payback Period
years
years
______________________________________…

Requirement 3:
Compute each project’s accounting rate of return. (Omit the "%" sign, which is provided for you. Round your answer to 1 decimal place.)

Project Y Project Z
Accounting rate of return
%
%
______________________________________…

Requirement 4:
Determine each project’s net present value using 8% as the discount rate. Use the Table B.3 for annuity value. For part 4 only, assume that cash flows occur at each year-end. (Omit the "$" sign in your response. Round your answer to the nearest dollar amount.)

Project Y Project Z
Net present value $

Newman Labs is considering buying equipment which would enable the company to obtain a five-year research contract. The specialized equipment costs 0,000 and will have no salvage value when the five-year contract period is over. The estimated annual operating results of the project are as follows:

revenue 750,000
expenses (including straight line depreciation) 650,000
increase in net income 100,000

All revenue from the contract and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes.

Refer to the information above. Compute the net present value of this investment, using a discount rate of 12%. (An annuity table shows that the present value of received annually for five years, discounted at 12%, is 3.605.)
a. 8,650.
b. 9,150.
c. 9,500.
d. 9,150.