Managerial Accounting Problem Essay Example | Topics and Well Written Essays - 500 words

Managerial Accounting Problem - Essay Example Depreciation only influences net income through taxes, but because I compute before-tax NPV, this doesn't matter. The net cash flow from each year is identical, so the present value of all cash flows can be calculated as PV of annuity with annual payment of 500,000 for 20 years. 2. When calculating after-tax NPV of the new lift, I continue using the data calculated in task #1, but expand it to include the effect of taxes. Depreciation is included in costs this time because it influences the income after tax and therefore the final cash flow. Depreciation is calculated based on MACRS recovery period of 10 years (taken from Table 6.4. on p.122, Brealey, Myers & Allen, 2006). The after-tax required return of 8% is used to calculate the net present value of cash flows from the project. Because the net cash flows for periods 12 - 20 are identical, I first found their net present value at the beginning of the 12th period and then discounted them back to period 0. 3. There is a number of subjective factors that can affect the investment decision apart from NPV of the project.