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## 03 Aug Analyze and compute the payback period, a

Analyze and compute the payback period, accounting rate of return, and net present value, based on information provided in the template.

#### Introduction

Note: Accounting requires specific steps that need to be executed in a sequence. The assessments in this course are presented in sequence and must be completed in order.

Flexible budgets, variance analysis, and standard costs are procedures used to assist managers with the control and monitoring of business activities.

#### Instructions

Note: Accounting requires specific steps that need to be executed in a sequence. The assessments in this course are presented in sequence and must be completed in order.

Use the Making the Right Decision Template [XLSX] to complete this assessment. Based on the data provided in the template, analyze and compute the payback period, accounting rate of return, and net present value.

#### Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:

• Competency 3: Apply time value of money concepts.
• Compute an accounting rate of return.
• Calculate the net present value.
• Competency 4: Analyze financial statements.
• Compute annual expected net cash flows.
• Compute a payback period.
• Competency 5: Communicate in a manner that is professional and consistent with expectations for professionals in the field of accounting.
• Communicate quantitative information accurately and effectively.

## Problems 1–4

 BUS-FPX4061 – Managerial Accounting Principles Assessment 9: Making the Right Decision Worksheet Problems 1–4 Input values Complete problems 1–4 based on the following scenario. Crouch Corp. needs to decide which of two new projects to invest in. Company name Crouch Corp. · Project A is an investment in new machinery that will cost \$264,000 Tax rate 20% and has a four-year life with no salvage value. Discount rate 6% · Project B is an investment in new machinery that will cost \$264,000 Project A Project B and has a three-year life with no salvage value. Investment \$ 264,000 \$ 264,000 Using straight-line depreciation, Crouch Corp. predicts that the two projects Life of machinery (in years) 4 3 will yield the following annual results, with cash flows occurring evenly four three throughout the year. Salvage value \$0 \$0 Predicted Annual Results Predicted Annual Results Project A (\$) Project B (\$) Project A (\$) Project B (\$) Sales 275,000 220,000 Sales 275,000 220,000 Expenses: Direct materials 38,500 27,500 Expenses: Direct materials 38,500 27,500 Direct labor 55,000 33,000 Direct labor 55,000 33,000 Overhead including depreciation 99,000 99,000 Overhead including depreciation 99,000 99,000 Selling and administrative expenses 19,800 19,800 Selling and administrative expenses 19,800 19,800 Total expenses 212,300 179,300 Total expenses 212,300 179,300 Pretax income 62,700 40,700 Pretax income 62,700 40,700 Income taxes (20%) 12,540 8,140 Income taxes (20%) 12,540 8,140 Net income 50,160 32,560 Net income 50,160 32,560 Complete the problems below. Add answers in this template and show your work. Present value of \$1 at 6% annuity for 4 years 3.4651 Present value of \$1 at 6% annuity for 3 years 2.6730 Problem 1 Compute the annual expected net cash flows for each project. Problem 2 Determine the payback period for each project. Problem 3 Compute the accounting rate of return for each project. Problem 4 Determine the net present value using 6% as the discount rate.

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