Answer:
Explanation:
Rule 70 is used to estimate how long it tales a cashflow amount to double.
The formula is as follows ;
Number of years = 70 / growth rate
<u>At 1.4% growth rate;</u>
Number of years = 70 / 1.4 = 50
<u>At 3.2% growth rate;</u>
Number of years = 70 / 3.2 = 21.88
<u>At 4.9% growth rate;</u>
Number of years = 70 / 4.9 = 14.29
<u>At 6.4% growth rate;</u>
Number of years = 70 / 6.4 = 10.94
<u>At 7.5% growth rate;</u>
Number of years = 70 / 7.5 = 9.33
Answer:
The cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method would be $108,099
Explanation:
Cash Flow from Operating Activities adjusts the Net Income for the Year with (1) Non-Cash Items, (2) Items Appearing Elsewhere (3) Changes in Working Capital.
From the given data Net Cash flow from Operating Activities is Determined as follows:
<u>Cash flow from Operating Activities</u>
Net income $124,042
<em>Adjustment for Changes in Working Capital.</em>
Increase In Trade Receivables (61,370-45,427) ($15,943)
Net Cash flow from Operating Activities $108,099
Answer:
Testerman Construction Co.
Internal rate of return method in analyzing capital expenditure:
Present value of expenditure = $149,630
Present of cash inflows annuity = $149,630 (using 20% discount rate and present value annuity factor of 3.3251 x $45,000)
NPV = $0 (PV of cash outflow - PV of cash inflow)
Therefore, the IRR = 20%
Explanation:
a) Data and Calculations:
Investment cost = $149,630
Annual net cash flows = $45,000
Investment period = 6 years
Annuity of future cash flows = 3.3251
b) Testerman’s IRR (Internal Rate of Return) is a capital budgeting and analysis tool which determines the discount rate that makes the present value of future inflows equal to the present value of outflows from a project. This IRR helps the managers to determine the projects that add value and are worth undertaking. IRR is based on assumptions. Similar projects with the same IRR will differ in returns due to the differences in timing and the size of the cash, the amount of debts and equity used to generate the returns, and the assumption of a constant reinvestment may which IRR makes.
$7,000
She is paid $6k and pays out $1k per month. GDP is a measure of money flowing through an economy.
