Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
Present-value factors for
annuity of 1 for 5 years
22% 2.864 2.864
IRR

2.857 24% 2.745
– Difference 0.119 0.007 0.007
IRR
22%
(2%) Project D We need to find the discount rate at which Initial investment, €200,000 = PV of a year annuity of €200,000 per year
deferred 5 years since the €200,000 of cash
inflows are received in years 6–9. Trial and error
At 18%
At 20%
At 22%
€1 per year for 4 years
2.690 2.589 2.494 Multiply by €200,000, the total value of the annuity
€538,000
€517,800
€498,80 0 Multiply by the present value of €1 5 years hence
0.437 0.402 0.370
PV of annuity in arrears
€235,106
€208,156
€184,55 6
€208,156 – €200,000
IRR 20% +
(2%)
€208,156 – €184,556
€8,156 20%
(2%) 20.7%
€23,600

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Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012 Ranking of projects

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