Average rate of return, cash payback period, net present value OBJ. 2, 3 method for a service
Question:
Average rate of return, cash payback period, net present value OBJ. 2, 3 method for a service company Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $520,000. The equipment has an estimated life of eight years and no residual value. It is expected to provide yearly net cash flows of $104,000. The company’s minimum desired rate of return for net present value analysis is 10%.
Compute the following:
a. The average rate of return, giving effect to straight-line depreciation on the investment.
b. The cash payback period.
c. The net present value. Use the present value of an annuity of $1 table appearing in this chapter (Exhibit 5). Round to the nearest dollar.
Step by Step Answer:
Financial And Managerial Accounting
ISBN: 9781305267831,9781305267848
13th Edition
Authors: Carl S. Warren , James M. Reeve , Jonathan Duchac