Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Appendix A: Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the

image text in transcribed

image text in transcribed

image text in transcribed

Appendix A:

image text in transcribed

Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life Initial cost and Book Value Annual Net After-Tax Cash Flows Annual Net Income Year $195,000 130,000 78,000 39,000 13,000 $82,000 71,000 60,000 49,000 38,000 $17,000 19,000 21,000 23,000 25,000 Management uses a 16 percent after-tax target rate of return for new investment proposals Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required 1. Compute the project's payback period. Assume that the cash flows in years 1 through 5 occur uniformly throughout each year (Round your answer to 2 decimal places.) ayback period years 2. Calculate the accounting rate of return on the investment proposal. Base your calculation on the initial cost of the investment. (Round your "Percentage" answer to 2 decimal place (i.e., .1234 should be entered as 12.3).) Accounting rate of return 3. Compute the proposal's net present value. Net present value Future Value and Present Value Tables Table I 14115 141 12:7 1.300 .100 2.144 102 215 15 1 Table II 1500 2 30 2.100 2120 Table III 11 S27 A29 207 23? 195 12 15 12 Table IV Preenta.et Sereeo ,- 3 2775 2A73 2677 2487 2402 2.322 2246 2174 2106 2,042 1 1 1.062 1 3aa 1.81e 5 4A52 4212 :BRI :)1 3N6 2435 3274 3127 2.391 2,064 276 268 2.05 2St2 243 48 a 544 3

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Accounting For Business

Authors: Bob Ryan

1st Edition

9781861529930

More Books

Students also viewed these Accounting questions

Question

Is there any formal training for teaching?

Answered: 1 week ago

Question

answer these questions based on the given graph and information:

Answered: 1 week ago

Question

7. Explain how an employee could reduce stress at work.

Answered: 1 week ago