Carper Company is considering a capital investment of $390,000 in additional productive facilities. The new machinery is expected to have useful life of 6 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $20,000 and $85,000, respectively. Carper has an 8% cost of capital rate, which is the required rate of return on the investment. Instructions (Round to two decimals.) (a) Compute (1) the cash payback period and (2) the annual rate of return on the proposed capital expenditure. (b) Using the discounted cash flow technique, compute the net present value. (c) Carper was presented with a second capital investment that provided similar production facilities as the first one. This investment cost $400,000, had a useful life of 7 years with a salvage value of $15,000. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $25,000 and $80,000 respectively. Carper's 8% cost of capital is also the required rate of return on the investment. (1) Compute the cash payback period. (2) Compute the annual rate of return. (3) Using the discounted cash flow technique, compute the net present value. (4) Based on these calculations, which investment do you recommend? Explain why. TARLE 1 Future Value of 1 106 1.150.00 106000 1.05000 1.10250 1.15263 1.21551 1.21665 1.27029 1.26321100 1.31593 1.40710 1.36857 201136 2.31306 206002 1.71192 1.48024 1.68968 1.79095 1.62889 404556 465239 1.7104 1.9830 1.53945 1.60103 1.66507 1.73168 1 50094 2.01220 1.11000 1.12000 1.22210 1.36763 140193 1.57152 LORSOS 1.7623 1204119712 2.07616 221068 2.30454 2.55 2.8192 3.10585 3.15176 3.49RAS 426349 4.89711 4.78459 5.47157 5310996 11039 5.89509 6.86604 6.54355 7.61997 7 26334 8.61276 806231 9.64629 615279 RR565 1.97993 2.15892 211154 25197 271902 2.93719 3.17217 3.42594 3.70002 3.99402 431570 4.660 1.67710 1.82804 1.99256 217189 2.36736 2.SR043 2.81267 3.06581 3.34173 3.64248 397051 4.32763 4.71712 514166 5.60441 2.13293 2.26090 2.39556 2.51015 2.69277 2.85434 3.02560 3.20714 1.9472 214359 2.35795 259374 285912 3.13843 3.45227 3.79750 4.17725 4.59497 5.05447 5.55992 611591 6,72750 187298 218287 1.947920 2.29202 2.02582 2.40662 2.10685 257605 21911226522 813706 9.35762 10.76126 1 237545 1423177 16.36654 TABLE 2 Future Value of an Annuity of 1 Periods 4% 1.00000 204000 3.12160 4.24646 5.41632 6.63299 7.89829 9.21423 10.58280 12.00611 12% 1.000 212000 3.37440 4.77933 6.35285 &11519 10.08901 12.29969 14.77566 17.54874 10 6% 100000 1.00000 205000 2.06000 3.1$250 3.18360 4.31013 4.37462 5.52563 5.63709 6.801916 .97532 8.14201 8.39384 9.54911 9.89747 11.02656 11.49132 12.57789 13.18079 14.20679 14.97164 1591713 16 86994 17.71298 18.88214 19.59863 21.01.507 21.57856 2327597 23.65749 25.67253 25.84037 28.21288 28.13238 30.90565 30.53900 33.75999 33,06595 36.78559 8% 9% 1.00000 1.00000 209000 209000 3.24540 3.27810 4.506114 .57313 5.86000 5.98471 733592 7.52334 892280 9.20044 10.63863 11.02847 12.48756 13.02104 14.48656 15.19293 16.64549 17.56029 1897713 20.14072 21.49530 22.95339 24.21492 26.01919 27.15211 29.36092 30.32428 33.00340 33.75023 36.97351 37.45024 41.30134 41.44626 46.01846 45.76196 51.16012 10% 11% 1.00000 1.00000 210000 2.11000 3.31000 3.3210 4.64100 4.70973 610510622780 7.71561 7.91286 948717 9.78327 11.43589 11.85913 13.57948 14.16397 15.93743 16.72201 18.53117 19.56143 21.38428 2271319 34.52271 26.21164 27.97498 30.09492 31.77248 34.40536 35.94973 39.18995 40.54470 44.50084 45.59917 50.39593 51.15909 56.93949 57.27500 64.20283 15% 1.00000 2.15000 347250 4.99338 6.74238 8.75374 11.06680 13.72692 16.78584 20.30372 24.34928 29.00167 34.35192 40.50471 47.58041 55.71747 65.07509 7 5.83636 88.21181 102.44358 12 13.48635 15.02581 16.62684 18.29191 20.02359 21.82453 23.69751 25.64541 27.67123 29.77808 20.65458 24.13313 28.02911 32.39260 37.27972 42.75328 48.88367 55.74972 63.43968 72.05244 18 19 20 TABLE 3 Present Value of 1 Perledes 96154 98238 12%, 15% 91743 R416R 33 .82270 82193 .79209 .74726 .70496 .75992 .73069 .67684 04451 62741 59190 58439 .67556 4119 32197 52679 24719 62460 39711 .38753 .35534 32518 31163 21494 285R4 25751 2566 22917 20.452 -18270 31524 27454 21909 12299 57748 55526 53391 51337 .49363 .47464 45639 53032 .S0507 45102 .45811 .43630 41552 39573 3769 29129 44220 41727 .39365 37136 -35034 .33051 311SD 16112 20900 1929 16963 15292 27027 25025 23171 21455 09093 .25187 23107 .21199 19449 17843 19785 17986 16351 14854 20 .14564 13004 11611 1 0367 12403 0 7027 06110 TABLE 4 Present Value of an Annuity of 1 Series Tenue Darments Periods 11% 12% 15% 1 .96154 1.88609 277509 3.62990 4.45182 5% 95238 .25041 272225 3.54595 4.32948 94340 1.83339 267201 3.46511 421216 .92593 1.78326 257710 3.31213 3.99271 4.91732 5.58239 6.20979 6,80169 7.360096 4.62788 5.20637 5.74664 6.24689 .71008 5.24214 6.00205 6.73274 7.43533 8.11090 8.76048 9.38507 9.98.565 10.56312 11.11839 11.65230 12.16567 1265930 13.13394 13.59033 5.07569 5.78637 6.46321 7.10782 7.72173 830641 8.86325 9.39357 9.8964 10.37966 10.83777 11.27407 11.68959 12.09532 12.46221 10% 9 1743 90909 1.75911 1.73554 2.53130 2.48685 323972 3.16986 3.88965 3.79079 4.48592 415526 5.03295 486842 5.53482 5.33493 5.99525 5.75902 6,41766 6.14457 6.80519 6.49506 7.16073 6.81369 7486907 10336 7.78615 736669 8.06069 7.60608 8.31256 7.82371 R 54363 8.02155 8.75563 8.20141 8.950128 36492 9.12855 8.51356 1.71252 1.69005 244071 2013 2.2323 3.100245 3.03735 285.498 3.69590 3.60478 3.35216 423064 4.11141 3.78448 471220 456376 41602 5.14612 496764 448732 5.53705 5.32825 477158 89923 5650225.01877 6.20652 5.93770 5.23371 6 49236 619437 5.402062 6.74987642355 5.58315 698187 6.62817 5.72448 7.190876 .81086 S.8737 7.37916 697399 5.95424 754879 7.11963 604716 7.70162 7 .24967 6.12797 7839297.36578 619623 7.96333 746944 6.25933 7.88687 7.1.1996 8.38384 7453608 8.85268 7.90378 9.294988 .24424 9.71225 8.55948 10.10590 8.85137 10477726 9.12164 10.82760 9.37189 11.15812 9.60360 11.46992 9 .81815 14 17 18 20