Question
Drake Corporation is reviewing an investment propo... Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the
Drake Corporation is reviewing an investment propo... Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investments life. Drake Corporation uses an 11% target rate of return for new investment proposals (b) What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50.) Annual rate of return for the investment _____________% ** 13.35 % IS NOT THE RIGHT ANSWER !!! **
Investment Proposal Initial Cost and Book Annual Cash Flows Annual Net Income Year Value 0 $104,700 71,000 41,100 21,300 8,500 0 $44,600 39,500 35,500 29,400 25,600 $10,900 9,600 15,700 16,600 17,100 4 Drake Corporation uses an 11% target rate of return for new investment proposalsStep by Step Solution
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