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. TABLE 1 Future Value of 1 LS1307 1.000 1.12 10 1.19102 1.2248 1.3103 1418 1.50353 1. 1.69 1.79ORS 1.04000 1.05000 1.08160 1.10250 1.12486 1.15763 1.16986 1.21551 1.21665 1.27638 1.26502 124010 1.31593 1.40710 1.36R57 1.47766 1.42131 1.55133 1.024 1.6299 1.510 1.71034 1.50103 1.79586 1.66507 1.88565 1.73168 1.97993 1.80094 2.078932 1.872982 18287 1.94790 229212 2.02582 2.40662 210685 252695 219112 26531 10% 1. ONDOO 1.09000 110000 111000 1.12000 1.16600 1.18810 1.21000 12540 1.25971 1.29503 1.33100 1.45763 1.40-493 1.36049 1.41158 1.45410 1.57352 1.4633 151862 161051 1605 167710 L7 137041 1.97 1.1.182 182804 1.96872 207616 221058 1. AS093 199256 2200 247595 1.999.00 217189 2.05795 25523 277308 215892 236736 2.59374 23092 310585 23164 258063 285312 5176 3.47855 251817 281257 3.49845 3.89598 271962 3.0658 3.45227 4.36349 2.93719334173 79750 4.31014 4.88711 3642484177254.784595.47357 15% 1 150 1.32250 1.520 1.74001 2011.16 2211105 200 0902 15ITS 400556 45209 5.350 615279 7.00571 813706 9.15762 10.76126 L. S LO 2.01220 2.13293 226090 .39856 254015 2.69277 2.69277 2RSEY 300 0714 1.425043 -97031 270002 3.70002 4.32761 192 4.71712 1520 5.1416 560441 4.59497 5.31089 6,13039 O5447 5995096 86601 590926.54355 7.68997 611 SOL 7 26144 R61276 672050 R0623 9 64629 14.23177 16.36654 TABLE 2 Future Value of an Annuity of 1 12% 15% Periods 4% S% 10% 1.000 100000 100000 1.00000 1.00000 100000 204000 205000 205000 205000 209000 21000) 3.12160 315250 3IRUSO 3124600327810331000 424646 431013 4.37462 450611 457313 464100 5.41632 5.52563 5.63709 5.86660 5.98-171 6.10510 661298 6.80191 697532 7.33592 7.52334 7.71561 7.898 29R1420139384 89220 9.20014 9 45717 9.21423 9.54911 9.89747 1063663 11.02847 11.43589 10.58280 11.02656 11.49132 12.48756 13.02104 13.57948 12.00611 12.57789 1 3.18079 14.48656 15.19293 15.93743 13.48635 14.20679 14.97164 16.64549 17.56029 18.53117 15.02581 15 0171116 8694 15.91713 16,86994 1897713 1897713 20.14072 21.38428 16.62684 17.71298 18.88214 21.49530 22.95339 24.52271 14 18.29191 19 S963 21.01507 24.21492 26.01919 27.97498 20.02359 21.57856 23.27597 27.15211 29.36092 31.77348 21.82453 23.65749 25.672533032428 33.00340 35.94973 17 23.69751 25.84037 28.21288 33.7502336,97351 40.5470 25.64541 28.13238 30.90565 37.45024 41.30134 45.59917 19 2 7.67123 30.53900 33.75999 41.44626 46.0184651.15909 20 29.77808 33.06595 36.78559 45.76196 $1.16012 57.27500 1.00000 1.00000 2.11000 212000 3.34210 3.37440 4.70973 47793 6.22780 635285 7.91286 811519 9.78327 1001 11.85943 12.299.00 14.16397 14.77566 16.72201 17.54874 19.56143 20.65458 22.71319 24.13313 26.21164 28.02911 30.09492 32.39260 34.40536 37.27972 39.18995 42.75328 44.50084 48.88367 50.39593 55.74972 56.9394963.43968 64.20283 72.05244 1.00000 2.15000 3.47250 4.99338 6.74238 8.75374 11.06680 13.72682 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 13 LE3 Present Values of Puede 5% 95248 900 995 974 82193 82220 .78353 .79 -735 747 2003 .74573 .71063 LILY 7306 526 10 62741 5990 .64461 .61391 6755 Som Sans 45119 50152 ADE 41193 02 52579 .55684 Soon 410 25668 22917 02 62450 .60057 57745 35526 51191 51337 19163 07464 45639 31728 58 25751 23199 20900 16253 40 39711 .35554 36720 MIR 300 1995 31534 27454 20939 21 2SINT 175 2017 231071975 21100 201711921916151 21455 1713 1 4864 42 41727 15 37116 3504 .33051 3110 12289 10687 16312 14564 103 41552 39573 13763 12403 11611 10367 06110 TABLE4 Present Value of an Annuity oferi m ents ON 15941 96151 1. SSD 277509 3.62990 9% 10% 91743 0909 1.75911 1.73554 20130 2685 1219723.16986 3.88965 3.79079 272225 3.54595 92503 1.7225 257710 3.31213 3.99271 267301 3.46511 ES 2236 4917 52214 6.00205 6.71274 7443523 R11090 505 5.79617 6.46321 7410TR 7.72173 6.20079 2017 5.74661 6.2.4689 6.100 1992 1525 5012954 6842 5542 5.73493 599525 5.75902 6.41766 14:57 477158 DUML 11% 12% 90090 926 26957 1.71252 1.6900S 1.62571 240133 223023 3.10245 3.03735 285.00 3.69590 3.60478 335216 422054 411141 4711220 456376 416002 514612 496764 4.48732 53225 56502501877 6,20652 5.93770 5.27071 .49236 619437 5.42062 674987 6.42255 5.58315 698152 6.62817 5.72443 719087 681036 5.8-6737 737916 6.97109 595434 75x9 7.11953 601716 7.701627.34967 612197 7 81929 736578 6.1933 7.96333 746944 6.25933 6 7.13896 680519 6.49506 753608 7.16073 6.81369 7.90378 7.486907 10336 824247.78615 736669 855048 06069 7 60608 870048 1907 908565 10.56312 11. 11839 11.65230 1216567 1265930 13.13394 13.59033 830641 125 BE3384 99257 880268 9.89864 9.2998 10.37966 9.71225 10.83777 10 1059 11 27407 10.47726 1168959 10.82760 120121115812 12 45221 11.46992 18 R5137 8.31256 9.12164 R$4363 9.371898.75563 9.60360 R 95012 9 81815 9.12855 782371 R 02155 20141 8.36492 51356 19
