Final Equations

Question 1

Accounting rate of return

Answer 1

Average annual operating income /

Initial investment

Question 2

Future value

Answer 2

Principal + interest earned
Present value + interest earned
Principal amount x FV factor
Amount of each cash flow x annuity FV factor

Question 3

Profitability Index

Answer 3

Present value of net cash inflows/ initial investment

Question 4

Internal rate of return

Answer 4

Where NPV = 0

Initial investment = PV of net cash inflow

Question 5

Predetermined overhead rate

Answer 5

Manufacturing overhead costs/ amount of allocation base

Total estimated

Question 6

MOH allocated to job

Answer 6

Predetermined MOH rate x

Actual amount of allocation base used

Question 7

Activity cost allocation rate

Answer 7

(Total estimated)

Activity cost pool/ allocation base

Question 8

Payback period

Answer 8

Initial investment/

Expected annual net cash inflow

Question 9

Annuity PV factor

Answer 9

Initial investment/

Amount of each equal net cash flow