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 investment's life. Investment Proposal Initial Cost Annual Annual Year and Book Cash Flows Net Income Value 0 $105,700 12345 69,800 $44,200 $8,300 43,000 40,400 13,600 21,100 35,000 13,100 7,000 29,000 14,900 0 26,000 19,000 Drake Corporation uses an 11% target rate of return for new investment proposals. (n) Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 1 .96154 .95238 .94340 .93458 .92593 .91743 .90909 .90090 .89286 .86957 2 .92456 .90703 .89000 .87344 .85734 .84168 .82645 .81162 .79719 .75614 3 .88900 .86384 .83962 .81630 .79383 .77218 .75132 .73119 .71178 .65752 4 .85480 .82270 .79209 .76290 .73503 .70843 .68301 .65873 .63552 .57175 5 .82193 .78353 .74726 .71299 .68058 .64993 .62092 .59345 .56743 .49718 6 .79031 .74622 .70496 .66634 .63017 .59627 .56447 7 .75992 .71068 .66506 .62275 .58349 .54703 8 .73069 .67684 .62741 .58201 .54027 .50187 .46651 .43393 .40388 .53464 .51316 .48166 .45235 .37594 .32690 .50663 .43233 9 .70259 .64461 .59190 .54393 .50025 .46043 .42410 .39092 .36061 .28426 10 .67556 .61391 .55839 .50835 .46319 .42241 .38554 .35218 .32197 .24719 11 .64958 .58468 .52679 .47509 .42888 .38753 .35049 .31728 .28748 .21494 12 .62460 .55684 .49697 .44401 .39711 .35554 .31863 .28584 .25668 .18691 13 .60057 .53032 .46884 .41496 .36770 .32618 .28966 .25751 .22917 .16253 14 .57748 .50507 .44230 .38782 .34046 .29925 .26333 .23199 .20462 .14133 15 .55526 .48102 .41727 .36245 .31524 .27454 .23939 .20900 .18270 .12289 16 .53391 .45811 .39365 .33873 .29189 .25187 .21763 .18829 .16312 .10687 17 .51337 .43630 .37136 .31657 .27027 .23107 .19785 .16963 .14564 .09293 18 .49363 .41552 .35034 .29586 .25025 .21199 .17986 .15282 .13004 .08081 19 .47464 .39573 .33051 .27615 .23171 .19449 .16351 .13768 .11611 .07027 20 .45639 .37689 .31180 .25842 .21455 .17843 .14864 .12403 .10367 .06110 (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 % (c) What is the net present value of the investment? (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer to O decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $ |