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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 $1,250,000. The equipment has an estimated life of eight years and no residual value. It is expected to provide yearly net cash flows of $312,500. The company's minimum desired rate of return for net present value analysis is 12%. Compute the following: a. The average rate of return, giving effect to straightline depreciation on the investment. % b. The cash payback period. c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar
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