answer B

Gantner Company is considering a capital investment of $300,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $27,000 and $87,000, respectively. Gantner has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment. TABLE4 Present Value of an Annuity of 1 12% 15% (n) Payments 4% 5% 6% 1 .96154 .95238 .94340 2 1.88609 1.85941 1.83339 3 2.77509 2.72325 2.67301 4 3.62990 3.54595 3.46511 5 4.45182 4.32948 4.21236 6 5.24214 5.07569 4.91732 7 6.00205 5.78637 5.58238 8 6.73274 6.46321 6.20979 9 7.43533 7.10782 6.80169 10 8.11090 7.72173 7.36009 11 8.76048 8.30641 7.88687 12 9.38507 8.86325 8.38384 13 9.98565 9.39357 8.85268 14 10.56312 9.89864 9.29498 15 11.11839 10.37966 9.71225 16 11.65230 10.83777 10.10590 17 12.16567 11.27407 10.47726 18 12.65930 11.68959 10.82760 19 13.13394 12.08532 11.15812 20 13.59033 12.46221 11.46992 7% 8 9% 0.93458 92593 .91743 1.80802 1.78326 1.75911 2.62432 2.57710 2.53130 3.38721 3.31213 3.23972 4.10020 3.99271 3.88965 4.76654 4.62288 4.48592 5.38929 5.20637 5.03295 5.97130 5.74664 5.53482 6.51523 6.24689 5.99525 7.02358 6.71008 6.41766 7.49867 7.13896 6.80519 7.94269 7.53608 7.16073 8.35735 7.90378 7.48690 8.74547 8.24424 7.78615 9.10791 8.55948 8.06069 9.44665 8.85137 8.31256 9.76322 9.12164 8.54363 10.05909 9.37189 8.75563 10.33560 9.60360 8.95012 10.59401 9.81815 9.12855 10% 11% .90909 .90090 1.73554 1.71252 2.48685 2.44371 3.16986 3.10245 3.79079 3.69590 4.35526 4.23054 4.86842 4.71220 5.33493 5.14612 5.75902 5.53705 6.14457 5.88923 6.49506 6.20652 6.81369 6.49236 7.10336 6.74987 7.36669 6.98187 7.60608 7.19087 7.82371 7.37916 8.02155 7.54879 8.20141 7.70162 8.36492 7.83929 8.51356 7.96333 .89286 .86957 1.69005 1.62571 2.40183 2.28323 3.03735 2.85498 3.60478 3.35216 4.11141 3.78448 4.56376 4.16042 4.96764 4.48732 5.32825 4.77158 5.650225.01877 5.93770 5.23371 6.19437 5.42062 6.42355 5.58315 6.62817 5.72448 6.81086 5.84737 6.97399 5.95424 7.11963 6.04716 7.24967 6.12797 7.36578 6.19823 7.46944 6.25933 Compute the annual rate of return. Annual rate of return Compute the cash payback period on the proposed capital expenditure. (Round answer to 2 decimal places, eg. 15.25.) Cash payback period 3.45 years Attempts: 1 of 1 used (b) Using the discounted cash flow technique, compute the net present value. (Use the above table.) (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, eg. 5,275.) Net present value $