Vilas Company is considering a capital investment of $190,400 inadditional productive facilities. The new machinery is expected tohave a useful life of 5 years with no salvage value. Depreciationis by the straight-line method. During the life of the investment,annual net income and net annual cash flows are expected to be$17,900 and $49,200, respectively. Vilas has a 12% cost of capitalrate, which is the required rate of return on the investment.
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(a) Compute the cash payback period. (Round answer to 2decimal places, e.g. 10.50.)
Cash payback period Entry field with correct answer 3.87years
Compute the annual rate of return on the proposedcapital expenditure. (Round answer to 2 decimal places, e.g.10.50.)
Annual rate of return is %
(b) Using the discounted cash flow technique, computethe net present value. (If the net present value is negative, useeither a negative sign preceding the number e.g. -45 or parenthesese.g. (45). Round answer for present value to 0 decimal places, e.g.125. For calculation purposes, use 5 decimal places as displayed inthe factor table provided.)
Net present value is?
Vilas Company is considering a capital investment of $190,400 inadditional productive facilities. The new machinery is expected tohave a useful life of 5 years with no salvage value. Depreciationis by the straight-line method. During the life of the investment,annual net income and net annual cash flows are expected to be$17,900 and $49,200, respectively. Vilas has a 12% cost of capitalrate, which is the required rate of return on the investment.
Click here to view PV table.
(a) Compute the cash payback period. (Round answer to 2decimal places, e.g. 10.50.)
Cash payback period Entry field with correct answer 3.87years
Compute the annual rate of return on the proposedcapital expenditure. (Round answer to 2 decimal places, e.g.10.50.)
Annual rate of return is %
(b) Using the discounted cash flow technique, computethe net present value. (If the net present value is negative, useeither a negative sign preceding the number e.g. -45 or parenthesese.g. (45). Round answer for present value to 0 decimal places, e.g.125. For calculation purposes, use 5 decimal places as displayed inthe factor table provided.)
Net present value is?
Related questions
Drake Corporation is reviewing an investment proposal. Theinitial cost and estimates of the book value of the investment atthe end of each year, the net cash flows for each year, and the netincome for each year are presented in the schedule below. All cashflows are assumed to take place at the end of the year. The salvagevalue of the investment at the end of each year is equal to itsbook value. There would be no salvage value at the end of theinvestmentâs life.
| year | intial cost and book value | annual cash flow | annual net income |
| 0 | $104,700 | ||
| 1 | $71,000 | $44,600 | $10,900 |
| 2 | $41,100 | $39,500 | $9,600 |
| 3 | $21,300 | $35,500 | $15,700 |
| 4 | $8,500 | $29,400 | $16,600 |
| 5 | $0 | $25,600 | $17,100 |
Drake Corporation uses an 11% target rate of return for newinvestment proposals.
Click here to view PV table.
(a) What is the cash payback period for thisproposal? (Round answer to 2 decimal places, e.g.10.50.)
Cash payback period in years?
(b) What is the annual rate of return for theinvestment? (Round answer to 2 decimal places, e.g.10.50.)
Annual rate of return for the investment is?%
(c) What is the net present value of theinvestment? (If the net present value is negative, useeither a negative sign preceding the number eg -45 or parentheseseg (45).
Round answer to 0 decimal places, e.g. 125. For calculationpurposes, use 5 decimal places as displayed in the factor tableprovided.)
Net present value is $
1 A) Hsung Company accumulates the following data concerning aproposed capital investment: cash cost $161,952, net annual cashflows $37,200, and present value factor of cash inflows for 10years 4.66 (rounded). (If the net present value isnegative, use either a negative sign preceding the number eg -45 orparentheses eg (45).)
Determine the net present value, and indicate whether theinvestment should be made.
Net Present Value: $___________
| The investment: should/should not be made. |
1 B) Rihanna Company is considering purchasing new equipment for$395,200. It is expected that the equipment will produce net annualcash flows of $52,000 over its 10-year useful life. Annualdepreciation will be $39,520. Compute the cash payback period.(Round answer to 1 decimal place, e.g.10.5.)
cash payback period ___________ years
