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Formulas
Fun with Calculations
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Miscellaneous
100
The first step in calculating the net present value.
What is discounting cash flows to the present?
100
Calculate the payback period expected annual net cash inflow: 304,026 amount invested: 1,000,300
What is 3.29?
100
This method ignores time value of money.
What is the Payback method?
100
This method emphasizes liquidity.
What is payback method?
100
This method uses the length of time it takes to recover in net cash inflows.
What is the payback method?
200
The amount invested divided by the expected annual net cash inflow.
What is the payback period formula?
200
Calculate the Profitability Index cost of investment: 320,000 present value of net cash inflows: 480,600
What is 1.50?
200
This method does not consider cash inflows after the cut off period.
What is the payback method?
200
These methods allow comparison among investment options.
What is the payback period, internal rate of return, accounting rate of return, and net present value.
200
These two methods look at long term investments.
What is the net present value and internal rate of return.
300
The average annual operating income from asset divided by average amount invested in asset.
What is the accounting rate of return formula?
300
Profitability Index Present Value of Net Cash Inflows: 1,345,420 Cost of Investment: 1,200,000
What is 1.12?
300
This method ignores the size of the project.
What is Internal Rate of Return method?
300
These two methods are effective but tend to produce conflicting answers.
What is the net present vale and internal rate of return?
300
This is what MACRS stands for.
What is modified, accelerated, cost, recovery, system?
400
The present value of net cash flows divided by the cost of investments.
What is the profitability index formula?
400
Find the Internal Rate of Return (use table D give us what it is between) Cost of Investment: 450,000 Net Cash Inflows: 176,000 Expected Life: 3
What is between 8 and 9 percent?
400
This is the most difficult method to calculate that we have learned.
What is the Internal Rate of Return?
400
This is the preferred investment selection method because it is theoretically valid and well understood.
What is the net present value?
400
This is the cash going out of the business in the forms of investments, repairs, or maintenance costs.
What is cash outflow?
500
This is what you replace with the "average amount invested in asset" if it is not provided for an accounting rate of return problem.
What is the amount invested in asset plus the residual value?
500
Find the Net Present Value (use table values) Cash investment: 100,000 1st year inflow: 50,000 2nd year inflow: 62,000 3rd year inflow 75,000 Rate: 7%
What is 62,076?
500
This method is extremely sensitive to discount rates.
What is the Net Present Value?
500
This method reveals to the investors their returns on the amount invested.
What is internal rate of return?
500
This measures how quickly management expects to recover their investment dollars.
What is the payback period?