MANAGERIAL ACCOUNTING CONNECT ACCESS
MANAGERIAL ACCOUNTING CONNECT ACCESS
17th Edition
ISBN: 9781265750879
Author: Garrison
Publisher: MCG
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Chapter 14, Problem 13F15

NPV is computed by deducting initial investment amount from the present value.

Project’s actual net present value will be calculated in the following way, when variable expenses changes to 45%:

Computation of annual cash inflow when variable expenses changed to 45%:

To determine

    Particulars Amount ($)
    Sales 2,735,000
    Less: Variable expenses 45% 1,230,750

    Contribution margin 1,504,250
    Less: Fixed expenses 735,000

    Earnings before depreciation, interest and taxes 769,250
    Less: Depreciation 595,000

    Earnings after depreciation or EBIT 174,250
    Add: Depreciation 595,000

    Annual cash inflow 769,250

Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

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MANAGERIAL ACCOUNTING CONNECT ACCESS

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