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George is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $15,000 Working capital 10,000 Operations (per year for 4 years): Cash receipts $20,000
George is considering the following investment proposal:
Initial investment: |
|
Depreciable assets (straight-line) | $15,000 |
Working capital | 10,000 |
Operations (per year for 4 years): |
|
Cash receipts | $20,000 |
Cash expenditures | 12,000 |
Disinvestment: |
|
Salvage value of equipment | $2,000 |
Recovery of working capital | 5,000 |
Discount rate | 8 percent |
Period | Present Value Factor |
1 | 0.92593 |
2 | 0.85734 |
3 | 0.79383 |
4 | 0.73503 |
Required: Determine the following values:
a. Payback period
b. Accounting rate of return on average investment
c. Net present value
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