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Little doubt

Urvashi Saini (Difference between Peak Performers & eve) (1494 Points)

31 January 2013

Hi
I have little confusion regarding calculation guys... please correct me

Pay back period = Initial cash outflow / Annual cash inflow
Initial cash outflow = 200000
Annual cash inflow = 82000

So It is 2.439 i.e 2 years 5 months and 8 days ( as per book)

I got 2.439 but 2 years 5 months and 10 days... there are similar 2-3 days difference
i'm getting from other cases of same Q.

How to calculate exactly... please tell me..

I'm doing this method to solve out
in 2.439 = 2 years
0.439*365= 160.235
160.235/30= 5.341
In 5.341= 5 months
0.341*30 =10.23
In 10.23= 10 days

I have done just guess work in my knowledge
Please correct me... and tell the right way
ASAP

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12 Replies

CA girl (Article Trainee-CA Final) (1942 Points)
Replied 31 January 2013

Hey, Calculations such as these are approximations...Sometimes the answer changes with the type of calculator you use..so you need not worry about minor differences.

1 Like

Urvashi Saini (Difference between Peak Performers & eve) (1494 Points)
Replied 31 January 2013

So these differences really don't matter na???

And yeah am I calculating right???

Shobhit Goel (Chartered Accountant) (101 Points)
Replied 31 January 2013

Yeah Urvashi.. Don't worry.. Such minor differences doesn't matter...

1 Like

gscindia (28 Points)
Replied 31 January 2013

The calculations in the book were done as under:

=200000/82000*12

=29.268 ( It means 29 completed months and 0.268 month )

= 29 months is equal to 2 years and 5 months

=0.268 month is equal to 8 days (0.268x 30)

However you calculation basis is also correct.

Regds

casachingarg @ gmail.com

2 Like

Urvashi Saini (Difference between Peak Performers & eve) (1494 Points)
Replied 31 January 2013

Originally posted by : gscindia
	The calculations in the book were done as under: =200000/82000*12 =29.268 ( It means 29 completed months and 0.268 month ) = 29 months is equal to 2 years and 5 months =0.268 month is equal to 8 days (0.268x 30) However you calculation basis is also correct. Regds casachingarg @ gmail.com

(Guest)

in your text book

calculation made by assuming 360days p.year

then u will get exact answer

2,00,00/- ///// 82,0000/- === 2.4390 YEARS

.4390*360= 158.04/30 = 5.268

5.268 - 5 = 0268 * 30 = 8.04 DAYS

I THINK U SATISFIED WITH EXACT ANSWER AS TEXT BOOK

NOTE: BUT CALCULATION SHOULD BE MADE FOR 365 DAYS EXACTLY RIGHT ANSWER.

2 Like

vijendra (article trainee) (230 Points)
Replied 31 January 2013

itz jst rounding off diff. it can.b ignored

1 Like

Darpan aggarwal (Article assitiant) (141 Points)
Replied 01 February 2013

hi urvashi.........

This problem due to divided by you days into month (i.e. u divivded by 30), but month is of 28,30 and 31 also.

THANKS

1 Like

RAJARSHI (CA-Finalist Entrepreneur ) (574 Points)
Replied 02 February 2013

differnces in answer to the sum come due to rounding off,assumptions,etc..its a minor thing..not a prblm ..

1 Like

Urvashi Saini (Difference between Peak Performers & eve) (1494 Points)
Replied 02 February 2013

Again I trapped in my silly mistake... correct me please...

Purchase price of Machinery 10,00,000
Installation price 1,50,000
Book salvage value 10% of purchase price
And Useful life 5 years...

So depreciation must be amounted to???
210000 or 207000

In book its 100000...
Q is about to find out Cash Inflow after tax (CFAT)... So should consider anything else...
Q. Calculate CFAT
Purchase price of New Machinery Rs. 10,00,000
Installation price Rs, 1,50,000
Worker's training exp. incurred to put asset to use Rs. 50000
Subsidy from Govt Rs. 60% of Purchase price
Working capital Rs. 300,000
Useful life of machine 5 yrs
Book salvage value 10% of puchase price
Cash salvage value Rs. 120000
Method of Dep SLM
Tax Rate 30%

Iske agey selling price or variable cost hi di hai.. 5 saal ki.. different hai..

As per book 100000 hona chaiye.. and mera kal 100000 aya tha.. aaj nahi aa rha hai....

AMIT (Accounts Incharge) (61 Points)
Replied 02 February 2013

Purchace Machine cost 1000000

add :(150000+50000)= 200000

Total 1200000

Less Subsidy Govt.

(60% of 1000000) 600000

Book cost 600000 (1200000-600000)

Less salvage value

(10% of 1000000) 100000

gross value 500000

years 5

dep. 100000

1 Like

Urvashi Saini (Difference between Peak Performers & eve) (1494 Points)
Replied 02 February 2013

Okazzz .. So i considered all these yesterday but forgot today..
Thanks... aise hi silly mistakes hote hai mujhse exam time me..
I'll remember this.. Thanks CCI hai... varna mere coachings bhi ni chal
rhe and koi batane wale bhaiya didi bhi ni hai...