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MANAGEMENT ACCOUNTING ( In English )

MANAGEMENT ACCOUNTING ( In English )

MANAGEMENT ACCOUNTING ( In English )
MANAGEMENT ACCOUNTING ( In English )

MANAGEMENT ACCOUNTING ( In English )
Capital Budgeting ( g~jab ev‡RwUs )
m~&&Î
As‡Ki g‡a¨ hw` Tax Rate †`Iqv bv _v‡K Zvn‡j †h Amount ¸‡jv †`Iqv _vK‡e& J Amount †K CFAT / NCB a‡i AsK ïiæi Ki‡Z n‡e|

As‡Ki g‡a¨ hw` Tax Rate †`Iqv _v‡K, †Kvb ïiæi K_v D‡jøL bv _vwK‡j CFBT †_‡K AsKwU ïiæ Ki‡Z nB‡e| Avi hw` †Kvb ïiæi K_v D‡jøL _v‡K

Zvn‡j †mLvb †_‡K AsKwU ïiæ Ki‡Z nB‡e|†hgb t- Cash Flow BeforeTax = (CFBT), Earning Before Tax = (EBT),Earning After Tax = (EAT),

Cash flow After Tax =(CFAT) / Net Cash Benefit = (NCB) BZ¨vw` _vK‡Z cv‡o|
CFBT – Dep: Exp = EBT – Tax Rate % = EAT + Dep : Exp = CFAT / NCB
Dep : Exp = (NCO-S.V)/Year
1 2 3 4 = (2 – 3) 5 = (4 × Tr) 6 = (4 – 5) 7 = (6 + 3)

MANAGEMENT ACCOUNTING ( In English )

(01). Pay Back Period (PBP) = wewb‡qvM cwi‡kvaKvj|
(a) bM` cªev‡ni cwigvb mgvb n‡j t-
PBP = NOC/NCB
(b) bM` cªev‡nicwigvbAmgvbn‡j t-
PBP = A+ (NCO-C)/D Her

MANAGEMENT ACCOUNTING ( In English )
MANAGEMENT ACCOUNTING ( In English )

e,
PBP = Pay Back Period =
NCO = Net Cash Outlay =
NCB = Net cash Benefit =
Here,
PBP = Pay Back Period.
NCO = Net Cash Outlay =

MANAGEMENT ACCOUNTING ( In English )

(a) bM` cªev‡ni cwigvb mgvb n‡j t-
PBR = NCB/NCO×100
(b) bM` cªev‡ni cwigvb Amgvb n‡j t-
PBR = 1/PBP×100 Here,
PBR = Pay Back Reciprocal
NCB = Net cash Benefit =
NCO = Net Cash Outlay =
Here,
PBR = Pay Back Reciprocal
PBP = Pay Back Period.
03. Surplus Life (SL)
SL = Use Life – PBP Here,
SL= Surplus Life = ?
PBP = Pay Back Period =
04. Surplus Cash Flow (SCF)

MANAGEMENT ACCOUNTING ( In English )

SCF = Surplus Cash Flow = ?
NCO = Net Cash Outlay =
S.V = Salvage Value = ?
05. Index of Surplus Cash Flow (ISCF)
ISCF = SCF/NCO×100
ISCF = Index of Surplus Cash Flow
SCF = Surplus Cash Flow =
NCO = Net Cash Outlay =
01. Average Rate of Return (ARR)= Mo DcvR©b NVI c×wZ|
ARR = (Average EAT / Average income)/(Average NCO/Average Investment)×100
Here,
ARR =Average Rate of Return

MANAGEMENT ACCOUNTING ( In English )
MANAGEMENT ACCOUNTING ( In English )

Average EAT = (Total EAT)/Year

MANAGEMENT ACCOUNTING ( In English )

A_ev,
As‡Ki g‡a¨ Working Capital _vK‡j,
Average NCO = W.C+ (Total NCO + SV)/2
02. Return on Investment (ROI)= Mo wewb‡qv‡Mi DcvR©b nvi|
ROI = (Average EAT)/(Total Cost/Investment )×100 Here,
ROI = Return on Investment
Average EAT = (Total EAT)/Year

03. Present Value Factor event Kivi m~G:-
(a) bM` cªev‡ni cwigvb Amgvbn‡j t-
P/V Factor = 1/〖(1+R)〗^n
(b) bM` cªev‡ni cwigvb Amgvbn‡j t-
P/V Factor = {1+1/〖(1+R)〗^N } ÷ R

MANAGEMENT ACCOUNTING ( In English )

NPV = Total P/V – NCO

05. Profitability Index (PI) = gybvdvi jf¨Zv m~PK|
PI = TPV/NCO×100 Here,
PI = Profitability Index.
TPV = Total Present Value.
NCO = Net Cash Outlay =
06. Net Profitability Index (NPI)
NPI = PI – 100% Here,
NPI = Net Profitability Index
PI = Profitability Index.
07. Present value/ Discount (PBP)

MANAGEMENT ACCOUNTING ( In English )

Present value/Discount (PBP) = NOC/(Average P/V )
(b) bM` cªev‡nicwigvbAmgvbn‡j t-
Present value/ Discount (PBP) = A+ (NCO-C)/D
Here,
Average P/V = (Total PV)/Year
08. Internal Rate of Return ( IRR) = Af¨šÍixb gybvdvi nvi|
IRR = A + C/(C – D) ×(A-B)

A = Lower Discount Rate = wb¤œ evUªvi ni|
B = Higher Discount Rate = D”P evUªvi ni|
C = NPV of Lower Discount Rate = wb¤œ evUªvi nv‡ii bxU eZ©gvb g~j¨|
D = NPV of Higher Discount Rate = D”P evUªvi nv‡i ibxU eZ©gvb g~j¨|
3rd Year

MANAGEMENT ACCOUNTING ( In English )

Chapter No -(7.6)
Capital Budgeting ( g~jab ev‡RU )

Pay Back Period. (PBP) &Pay Back Reciprocal. (PBR).

Ex- 01. From the following information of Moon company.
Cost of Investment Tk 10,00,000
Expected life 10 years
Annual cash inflow Tk 2,50,000
Compute :-
Pay Back Period. (PBP). [ Ans : 4 years ]
Pay Back Reciprocal. (PBR). [Ans : 25% ]
Surplus Life. (SL). [ Ans : 6 years ]
Surplus Cash Flow (SCF). [ Ans : 2,50,000 ]
Index of Surplus Cash Flow (ISCF) [ Ans : 25% ]

MANAGEMENT ACCOUNTING ( In English )

Ex-02. The Marian company estimates that it can save Tk 30,000 per year kin cash operating costs for the next 5 years. If it buys a machine at a cost of Tk 1,30,000. No residual value is expected. Calculate Pay Back Period.
Compute:-
Pay Back Period. (PBP). [ Ans: 4.33 years ]
Pay Back Reciprocal. (PBR). [Ans: 23.08% ]
Surplus Life. (SL). [ Ans: .67 years ]
Surplus Cash Flow (SCF). [ Ans : 20,000 ]
Index of Surplus Cash Flow (ISCF) [ Ans: 15.38% ]

Ex-03. A firm is considering purchasing a machine. The machine will cost Tk 30,000. It will yield annually Tk 12,000 before tax. The corporate tax rate is 30%. The life of the machine is 5 years. Find out Pay Back Period.
Compute:-

MANAGEMENT ACCOUNTING ( In English )

Pay Back Reciprocal. (PBR). [Ans: 34% ]
Surplus Life. (SL). [ Ans: 2.06 years ]
Surplus Cash Flow (SCF). [ Ans : 21,000 ]
Index of Surplus Cash Flow (ISCF) [ Ans: 70% ]

Ex-04. Prince Ltd. wants to buy a machine it will cost Tk 1,50,000. It is estimated that the machine can save Tk 40,000 per year in cash operating costs for the next 10 years. No residual value is expected. Assume that income taxes rate averages 40% of taxable income. Determine the Pay Back Period.
Compute:-
Pay Back Period. (PBP). [ Ans: 5 years ]
Pay Back Reciprocal. (PBR). [Ans: 20% ]
Surplus Life. (SL). [ Ans: 5 years ]
Surplus Cash Flow (SCF). [ Ans : 1,50,000 ]
Index of Surplus Cash Flow (ISCF) [ Ans: 100% ]

MANAGEMENT ACCOUNTING ( In English )

Ex-05. Cost of a machine is Tk 4,00,000. Followiting data are available :
Year Cash in flow (Tk)
1 1,10,000
2 1,10,000
3 1,10,000
4 1,10,000
5 1,10,000
Calculate (i) PBP. (ii) PBR. (iii) Surplus life (S.L)
[ Ans : (i) 3.64 years.(ii) 27.50%. (iii) 1.36 years ]

MANAGEMENT ACCOUNTING ( In English )

Year Cash in flow (Tk)
1 12,500
2 12,500
3 12,500
4 12,500
5 12,500
Calculate (i) PBP and (ii) PBR. (iii) Surplus life (S.L)
[ Ans : (i) 5.12 year. (ii) 19.53%. (iii) .12 years ]
Ex-07. Dion Co. Ltd. is considering buying a machine. It will cost Tk 82,000. Its economic life is 5 years having a salvage value of Tk 2,000 at the end. It ends. It will yield cash flow after tax as follows :
Year CFAT (Tk)
1 20,000
2 25,000
3 30,000
4 34,000
5 40,000
Required:
(i) Pay Back Period. (PBP). [Ans: 3.21 years ]
(ii)Pay Back Reciprocal. (PBR). [ Ans: 31.15% ]
(iii) Surplus Life. (SL). [ Ans: 1.79 years ]

MANAGEMENT ACCOUNTING ( In English )

Ex-08. From the following information of Moon company.
Capital expenditure Tk 15,000
Scrap value 4,000
Life 5years
Year Cash flow after tax (Tk)
1 4,000
2 4,000
3 4,000
4 3,000
5 2,500
Required:
(1) Pay Back Period. (PBP). [Ans: 4 years ]
(2) Pay Back Reciprocal. (PBR). [ Ans: 25% ]
(3) Surplus Life. (SL). [ Ans: 1 year]

MANAGEMENT ACCOUNTING ( In English )

Ex-09. Nipa Ltd. plans to buy a machine which costs Tk 3,00,000. The estimated salvage value is zero. The tax rate is 50%. The company uses straight-line depreciation and the proposed project has cash flow before tax as follows.
Year CFBT (Tk)
1 70,000
2 90,000
3 80,000
4 75,000
5 65,000
Required:
Pay Back Period.(PBP). [Ans : 4.36 years ]
Pay Back Reciprocal. (PBR). [ Ans : 22.94% ]
Surplus Life. (SL). [ Ans : .64 years ]
Surplus Cash Flow (SCF). [ Ans : 40,000 ]
Index of Surplus Cash Flow (ISCF) [Ans : 13.33% ]

Ex-10. Salman Ltd. is considering investing in a project that costs Tk 5,00,000. The estimated salvage value is zero, the tax rate is 55%. The Co. uses straight-line depreciation and the proposed project has cash flows before Tax as follows :
Year CFBT (Tk)
1 1,00,000
2 1,00,000
3 1,50,000
4 1,50,000
5 2,50,000
Required:

MANAGEMENT ACCOUNTING ( In English )

Pay Back Reciprocal. (PBR). [ Ans : 23.09% ]
Surplus Life. (SL). [ Ans : .67 years ]
Surplus Cash Flow (SCF). [Ans : 1,12,500 ]
Index of Surplus Cash Flow (ISCF) [Ans : 22.50% ]
Ex-11. Net cost outlay Tk 1,00,000
Yearly Net Cash Benefit Tk 30,000
Useful life 5 years
Required : (1) Pay Back Period (PBP). (2) Surplus Life (SL). (3) Surplus cash flow (SCF).
(4) Index of Surplus Cash Flow (ISCF)
[ Ans : (1) 3.33 years. (2) 1.67 years. (3) 50,000 (4) 50% ]

Ex-12. Net cost outlay Tk 1,50,000
Yearly Net Cash Benefit Tk 40,000
Useful life 5 years
Required : (1) Pay Back Period (PBP). (2) Surplus Life (SL). (3) Surplus cash flow (SCF).
(4)Index of Surplus Cash Flow (ISCF)
[ Ans : (1) 3.75 years. (2) 1.25 years. (3) 50,000 (4) 33.33% ]

MANAGEMENT ACCOUNTING ( In English )

Annual cash flow before tax Tk 40,000
The expected life of the project is 5 years.
Tax rate 30%
Salvage value Tk 20,000
Depreciation has been charged on a straight-line basis.
Required : (1) Pay Back Period (PBP). (2) Surplus Life (SL). (3) Surplus cash flow (SCF).
(4)Index of Surplus Cash Flow (ISCF)
[ Ans : (1) 3.53 years. (2) 1.47 years. (3) 70,000 (4) 58.33% ]

Ex-14. Initial Investment of a project is Tk 1,50,000
Annual cash flow before tax Tk 50,000
The expected life of the project is 5 years.
Tax rate 35%
Salvage value Tk 40,000
Depreciation has been charged on a straight-line basis.
Required : (1) Pay Back Period (PBP). (2) Surplus Life (SL). (3) Surplus cash flow (SCF). (4)Index of Surplus Cash Flow (ISCF)
[ Ans : (1) 3.73 years. (2) 1.27 years. (3) 91,000 (4) 60.67% ]

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