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Drake Corporationis Pevewing an investment proposal, The initial cost is 5105,400 . Estinates of the bookvalue of the investment at the end of each year,

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Drake Corporationis Pevewing an investment proposal, The initial cost is 5105,400 . Estinates of the bookvalue 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 assumed to equat its book value. There would be no salvage value at the end of the irvestment's life. Drake Corporation uses an 11% target rate of return for new investment proposals. (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, eg. 10.50.) Cash payback period years (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 precedi or parentheses eg (45). Round answer to 0 decimal places, es. 125. For calculation pupposes, use 5 decimal places as disp What is the net present value of the investment? (If the net present value is negative, use either a negative sign preceding the number e-g -45 or parentheses e8 (45). Round answer to 0 decimal places, es. 125. For calculation purposes, use 5 decimal places as displayed in the foctor table provided) Net presentvalue Linkin Corporation is considering purchasing a new delivery truck. The truck has many advantages over the compary's current truck (not the least of which is that it runs). The new truck would cost \$55.500. Because of the increased capacify, reduced mainterance costs, and increased fuel economy, the new truck is expected to generate cost savings of $7,400. At the end of 8 years, the company will sell the truck for an estimated $27,000. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50%6 of the asset's sestimated useful life. Larry Newion, a new manager, has suegetied that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company's cost of capital is 8%. Click here to view the factor table. (a) Compute the cash payback period and net present walue of the proposed investment. Wr the net erowene value snegative use eithera negative sign preceding the number es .45 or parentheses g.45), Round answer for present value to 0 dadimal ploces, es. 125 . flocud anoser for Payback period to 1 decimal place, es. 10.5. For calculation purposes, use 5 decimal places as displayed in the foctor tobie provided.] Cashpaybackperied years Does the project meet the company's cash payback criteria? Does it meet the net present value criteria for acceptance? Drake Corporationis Pevewing an investment proposal, The initial cost is 5105,400 . Estinates of the bookvalue 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 assumed to equat its book value. There would be no salvage value at the end of the irvestment's life. Drake Corporation uses an 11% target rate of return for new investment proposals. (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, eg. 10.50.) Cash payback period years (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 precedi or parentheses eg (45). Round answer to 0 decimal places, es. 125. For calculation pupposes, use 5 decimal places as disp What is the net present value of the investment? (If the net present value is negative, use either a negative sign preceding the number e-g -45 or parentheses e8 (45). Round answer to 0 decimal places, es. 125. For calculation purposes, use 5 decimal places as displayed in the foctor table provided) Net presentvalue Linkin Corporation is considering purchasing a new delivery truck. The truck has many advantages over the compary's current truck (not the least of which is that it runs). The new truck would cost \$55.500. Because of the increased capacify, reduced mainterance costs, and increased fuel economy, the new truck is expected to generate cost savings of $7,400. At the end of 8 years, the company will sell the truck for an estimated $27,000. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50%6 of the asset's sestimated useful life. Larry Newion, a new manager, has suegetied that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company's cost of capital is 8%. Click here to view the factor table. (a) Compute the cash payback period and net present walue of the proposed investment. Wr the net erowene value snegative use eithera negative sign preceding the number es .45 or parentheses g.45), Round answer for present value to 0 dadimal ploces, es. 125 . flocud anoser for Payback period to 1 decimal place, es. 10.5. For calculation purposes, use 5 decimal places as displayed in the foctor tobie provided.] Cashpaybackperied years Does the project meet the company's cash payback criteria? Does it meet the net present value criteria for acceptance

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