Plywood Press Financial Analysis & Depreciation Calculation

EXHIBIT 1: Nakoi Dakota Plywood Press Information

This exhibit provides an overview of two plywood presses from Nakoi Dakota, detailing their output, operating costs, and market value.

| Feature | Press 1 | Press 2 | |---|---|---| | Output per day (square feet) | 6,000 | 7,000 | | Days used each year | 240 | 240 | | Market price per square foot of plywood | $1.80 | $1.80 | | Raw materials (% of sales) | 70% | 70% | | Annual labor cost | $276,000 | $226,000 | | Annual maintenance cost | $52,000 | $60,000 | | Annual overhead (cash) | $78,000 | $60,000 | | Year 7 after-tax market value | $75,000 | $390,000 |

EXHIBIT 2: Example of Average Accounting Rate of Return (AARR) Calculation

This example demonstrates the calculation of the Average Accounting Rate of Return (AARR) for a project, assuming straight-line depreciation.

Assumptions:

• Initial project cost is depreciated over the project's life on a straight-line basis.

| Year | 0 | 1 | 2 | 3 | 4 | |---|---|---|---|---|---| | Initial project cost | 8A | | | | | | Accumulated depreciation | 0 | 2 | 4 | 6 | 8 | | Book value | 8 | 6 | 4 | 2 | 0 | | Net Income (NA) | | 1 | 2 | 2 | 1 |

Calculations:

• Average Book Value = (8 + 6 + 4 + 2 + 0) / 5 = 4
• Average Net Income = (1 + 2 + 2 + 1) / 4 = 1.5
• AARR = Average Net Income / Average Book Value = 1.5 / 4 = 0.375 = 37.5%

EXHIBIT 3: Calculation of Straight-Line Depreciation

This exhibit provides a step-by-step calculation of straight-line depreciation for an asset.

Given:

• Cost of asset: $10,000
• Residual value: $1,000
• Years of project (economic life): 5

Formula:

Depreciation Amount (per year) = (Cost - Residual Value) / Years of Project (Economic Life)

Calculation:

Depreciation Amount = ($10,000 - $1,000) / 5 = $1,800 per year