CH 12 #5

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 $285,000. The equipment has an estimated life of 10 years and no residual value, It is expected to provide yearly net cash flows of $57,000. The company's minimum desired rate of return for net present value analysis is 12%. Present Value of an Annulty of 51 at Comeound Interest Compute the following: a. The average fate of return, giving effect to straight-line depreciation on the imestment, if recuired, round your answer to one decimal place. \%h b. The cosh paybock period: Compute the following: a. The averace rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. % b. The cash paybsck period. 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 present volue for current grading purpose. tretins investment cose divided toy two equals average invertment. b. bivide the amount to be invested by the annusi net cash infiow. texti)