Edelean Corporation used to accept investment opportunities that yielded discounted returns of 12%. With an increasing cost of capital, the company is now expecting an 18% discounted rate of return.One project with the following pertinent data are to be evaluated:Net investment $1,890,000Estimated economic life 6 yearsEstimated annual returns before depreciation & tax $600,000Depreciation is to be deducted by the SYD formula. Assume that the entire net investment is subject to depreciation with no estimated scrap value. Use a tax rate of 30%. Requirements:1. Net Returns for Year 1 to Year 6 2. Payback period (round to 3 decimals)3. Discounted rate of return (round to 3 decimals)4. Net present value5. Profitability index (round to 3 decimals)
Edelean Corporation used to accept investment opportunities that yielded discounted returns of 12%. With an increasing cost of capital, the company is now expecting an 18% discounted rate of return.One project with the following pertinent data are to be evaluated:Net investment $1,890,000Estimated economic life 6 yearsEstimated annual returns before depreciation & tax $600,000Depreciation is to be deducted by the SYD formula. Assume that the entire net investment is subject to depreciation with no estimated scrap value. Use a tax rate of 30%. Requirements:1. Net Returns for Year 1 to Year 6 2. Payback period (round to 3 decimals)3. Discounted rate of return (round to 3 decimals)4. Net present value5. Profitability index (round to 3 decimals)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Edelean Corporation used to accept investment opportunities that yielded discounted returns of 12%. With an increasing cost of capital, the company is now expecting an 18% discounted rate of return .One project with the following pertinent data are to be evaluated:Net investment $1,890,000Estimated economic life 6 yearsEstimated annual returns before depreciation & tax $600,000Depreciation is to be deducted by the SYD formula. Assume that the entire net investment is subject to depreciation with no estimated scrap value. Use a tax rate of 30%. Requirements:1. Net Returns for Year 1 to Year 6 2. Payback period (round to 3 decimals)3. Discounted rate of return (round to 3 decimals)4. Net present value5. Profitability index (round to 3 decimals)
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