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Discussion week 5 B. Read the following proQuest article: Munter, P. (2001, July). Using Cash Flow Information and Present Value in Accounting Measurements. The Journal of Corporate Accounting and Finance, 12(5) 53-56. Retrieved March 17, 2010, from ProQuest Database. (Document ID: 75198888). Assessment Tools Referencing the readings for the week, define the concepts of present value, payback method, internal rate of return, or net present value and elaborate on your interpretation of their value as assessment tools for an accountant or operator (include an example). Respond to at least two of your classmates' postings. 16-3 Marsha Bittner expects to receive a $600,000 cash benefit when she retires five years from today. MS Bittner employer has offered an early retirement incentive by agreeing to pay her 360,000 today if she agrees to retire immediately. Ms. Bittner desires to earn a rate of return of 12%. A. Assuming that the retirement benefits are the only consideration in making the retirement decision, should Ms. Bittner accept her employers offer? B. Identify the factors that cause the present value of the retirement benefit to be less than $600,000. 16-4 The Dean of the school of Natural Science is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels compelled to earn an 8% return on the investment of funds. Estimates of cash inflows from copy machines that have been placed in other university building indicate that the copy machine would probably produce incremental cash inflows of approximately $15,000 per year. The machine is expected to have a 3 year useful life with zero salvage value. A. Use Present Value Table 1 in the chapter's appendix to determine the maximum amount of cash the dean should be willing to pay for a copy machine. B. Use present value table 2 in chapter's appendix to determine the maximum amount of cash the dean should be willing to pay for a copy machine. C. Explain the consistency or lack of consistency in the answers to requirements A and B. Computation of Net Present Value for 1 & project 2 Net Present value for project 1 Period 1 Present Value 8% 0.925929 2 0.857339 3 0.793832 4 0.735030 5 0.680583 Table 2 1. 0.925926 2. 1.783265 3. 2.577097 4. 3.312127 5. 3.992710 16-6 Dmitry Chernisky is seeking part time employment while he attends school. He is considering purchase technical equipment that will enable him to start a small training services company that will enable him to start a small training services company that will offer tutorial services over the Internet. Dimitry expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, he expects demand to stabilize. The following table presents the expected cash flows. Year of operations Cash inflow Cash outflow 2012 $ 13,500 9,000 2013 19,500 12,000 2014 21,000 12,600 2015 21,000 12,600 In addition to these cash flows, Mr. Chernisky expects to pay $21,000 for the equipment. He also expects to pay $3,600 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $1,500 salvage value and a 4 year useful life. Mr. Chernisky desires to earn a rate of return of 8 %. (Round computations to the nearest whole penny) A. Calculate the net present value of the investment opportunity. B. Indicate whether the investment opportunity is expected to earn a return that is above or below the desired rate of return and whether it should be accepted