II. Computation

1. Compute the payback period of an investment of 2,000 that produces a net cash flow of 800 in its first year and 2,000 in its second year.

2. Compute the accounting rate of return (ARR) for an investment on equipment of 800,000, with 10-year life and no salvage value, and has an annual cash flow of 150,000.

3. Compute the NPV of an investment of 100,000, with net cash flow of 60,000 each year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80.

4. Compute a division of a company's a) residual income, and b) ROI, with these data for its operations:

Sales 800,000

Operating expenses 650,000

Interest expense 50,000

Tax expense 30,000

Shareholders' equity 200,000

Average operating assets 600,000

Minimum required rate of return 12%

5. Compute the company's a) WACC, b) total cost of capital, and c) EVA with these data:

After-tax operating income 250,000

Total capital employed 1,060,000

Long-term debt, 9% interest 100,000

Owner's equity 900,000

Average cost of common equity 12%

Tax rate 35%

6. Compute the transfer price per unit a) using variable cost, and b) using variable cost plus 20% of Division 1 of a company selling its output to Division 2 of the same company. The market price per unit of output is 2,000. Additional data are:

Units 1,000

Direct materials 450,000

Direct labor 300,000

Factory overhead (25% variable) 300,000

Operating expenses (20% variable) 500,000

with solutions all please