Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Southwest Transportation Inc. is considering a distribution facility at a cost of $195,000. The facility has an estimated life of 10 years and a no residual value. It is expected to provide yearly net cash flows of $39,000. The company's minimum desired rate of return for net present value analysis is 10%.
Click here to access the present value tables (Exhibit 2 and Exhibit 5) to use for this problem.
a. Compute average rate of return, giving effect to straight-line
fill in the blank 1 %
b. Compute the cash payback period.
fill in the blank 2 years
c. Compute the net present value. If required, use the minus to indicate a negative net present value.
| Total present value of annual net cash flows | $fill in the blank 3 |
| Less: amount to be invested | fill in the blank 4 |
| Equals: net present value | $fill in the blank 5 |
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