FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Rate of Return , Cash Payback Period,Net Present Value MethodBi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $145,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net
cash flows of $29,000. The company’s minimum desired rate of return for net present value analysis is 15%.Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following:
a. The average rate of return, assuming the annual earnings are equal to the net cash flows less the annual
depreciation expense on the equipment. If required, round your answer to one decimal place.
fill in the blank 1 %b. The cash payback period.
? yearsc. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar. If required, use a minus sign to indicate negative net present value" for current grading purpose.
Present value of annual net cash flows $fill in the blank Less amount to be invested $fill in the blank Net present value $fill in the blank
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