Question
Mouser Company is evaluating a capital expenditure proposal with the following predicted cash flows: Initial investment: $110,000 Operations: Year 1 $40,000 Year 2 30,000 Year
- Mouser Company is evaluating a capital expenditure proposal with the following predicted cash flows:
| Initial investment: | $110,000 |
| Operations: |
|
| Year 1 | $40,000 |
| Year 2 | 30,000 |
| Year 3 | 55,000 |
| Salvage value: | -0- |
Additional information for interest rate of 12 percent:
| Present value of $1 - year 1 | 0.893 |
| Present value of $1 - year 2 | 0.797 |
| Present value of $1 - year 3 | 0.712 |
| Present value of an annuity of $1, (3 periods) | 2.402 |
Required: Determine the following values:
a. Net present value of the investment at a discount rate of 12 percent
b. Payback period
c. Accounting rate of return using average investment
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Financial and Managerial Accounting
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
12th edition
978-1133952428, 1285078578, 1133952429, 978-1285078571
