Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Railroad Inc. is considering acquiring equipment at a
Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $288,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $36,000. The company's minimum desired rate of return for net present value analysis is 10%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 1.833 N 1.736 1.690 1.626 1.528 w 2.673 2.487 2.402 2.283 2.106 A 3.465 3.170 3.037 2.855 2.589 0 4.212 3.791 3.605 3.353 2.991 0 4.917 4.355 4.111 3.785 3.326 5.582 4.868 4.564 4.160 3.605 0 6.210 5.335 4.968 4.487 3.837 0 6.802 5.759 5.328 4.772 4.031 7.360 8 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. % b. The cash payback period. years c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar. If required, use a minus sign to indicate negative net present value for current grading purpose. Present value of annual net cash flows Amount to be invested Net present value
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started