The capital investment committee of Dowell Company is currently considering two investments. The estimated income from operations and net cash flows expected from each investment are as follows: Truck Equipment Year Income from operations Net Cash Flow Income From Operations Net Cash Flow 1 6,000 22,000 13,000 29,000 2 9,000 25,000 10,000 26,000 3 10,000 26,000 8,000 24,000 4 8,000 24,000 8,000 24,000 5 11,000 27,000 3,000 19,000 44,000 124,000 42,000 122,000 Each investment requires GH: 80,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for the purpose of the net present value analysis. Required: Required: Compute the following 1. The average rate of return for each investment 2. The net present value for each investment 3. The profitability index
The capital investment committee of Dowell Company is currently considering two investments. The estimated income from operations and net
investment are as follows:
|
Truck |
Equipment |
|||
|
Year |
Income from operations |
Net Cash Flow |
Income From Operations |
Net Cash Flow |
|
1 |
6,000 |
22,000 |
13,000 |
29,000 |
|
2 |
9,000 |
25,000 |
10,000 |
26,000 |
|
3 |
10,000 |
26,000 |
8,000 |
24,000 |
|
4 |
8,000 |
24,000 |
8,000 |
24,000 |
|
5 |
11,000 |
27,000 |
3,000 |
19,000 |
|
|
44,000 |
124,000 |
42,000 |
122,000 |
Each investment requires GH: 80,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for the purpose of the
Required: Compute the following
1. The average rate of
2. The net present value for each investment
3. The profitability index
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