Exercise 25-14
Average rate of return, cash payback period, net present valuemethod
>> Additional Resources <<
Great Plains Transportation Inc. is considering acquiring equipmentat a cost of $246,000. The equipment has an estimated life of 10years and no residual value. It is expected to provide yearly netcash flows of $61,500. The companyâs minimum desired rate of returnfor net present value analysis is 10%.
Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 1.528
3 2.673 2.487 2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791 3.605 3.353 2.991
6 4.917 4.355 4.111 3.785 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192
a. Compute the average rate of return, giving effect tostraight-line depreciation on the investment. Do not enter thepercent sign.
30%
b. Compute the cash payback period.
4 years
c. Compute the net present value. Use the above table of thepresent value of an annuity of $1. Round to the nearestdollar.
Present value of annual net cash flows: $ _____________ ?
Amount to be invested: 246000
Net present value: $ ______________?
need the answerrrr/ make sure your round to the nearest dollar...
Average rate of return, cash payback period, net present valuemethod
>> Additional Resources <<
Great Plains Transportation Inc. is considering acquiring equipmentat a cost of $246,000. The equipment has an estimated life of 10years and no residual value. It is expected to provide yearly netcash flows of $61,500. The companyâs minimum desired rate of returnfor net present value analysis is 10%.
Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 1.528
3 2.673 2.487 2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791 3.605 3.353 2.991
6 4.917 4.355 4.111 3.785 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192
a. Compute the average rate of return, giving effect tostraight-line depreciation on the investment. Do not enter thepercent sign.
30%
b. Compute the cash payback period.
4 years
c. Compute the net present value. Use the above table of thepresent value of an annuity of $1. Round to the nearestdollar.
Present value of annual net cash flows: $ _____________ ?
Amount to be invested: 246000
Net present value: $ ______________?
need the answerrrr/ make sure your round to the nearest dollar...
Related questions
Great Plains Transportation Inc. is considering acquiringequipment at a cost of $272,000. The equipment has an estimatedlife of 10 years and no residual value. It is expected to provideyearly net cash flows of $34,000. The company's minimum desiredrate of return for net present value analysis is 15%.
| Present Value of an Annuity of $1 atCompound Interest | |||||
| Year | 6% | 10% | 12% | 15% | 20% |
| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
| 2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
| 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
| 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
| 5 | 4.212 | 3.791 | 3.605 | 3.353 | 2.991 |
| 6 | 4.917 | 4.355 | 4.111 | 3.785 | 3.326 |
| 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
| 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
| 9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
| 10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
Compute the following:
a. The average rate of return, giving effect tostraight-line depreciation on the investment. If required, roundyour answer to one decimal place.
%
b. The cash payback period.
8 years
c. The net present value. Use the above tableof the present value of an annuity of $1. Round to the nearestdollar. If required, use a minus sign to indicate negative netpresent value" for current grading purpose.
| Present value of annual net cash flows | $ |
| Less amount to be invested | $ |
| Net present value | $ |
Average Rate of Return, Cash Payback Period, Net Present ValueMethod
Great Plains Transportation Inc. is considering acquiringequipment at a cost of $82,000. The equipment has an estimated lifeof 10 years and no residual value. It is expected to provide yearlynet cash flows of $41,000. The company's minimum desired rate ofreturn for net present value analysis is 10%.
| Present Valueof an Annuity of $1 at Compound Interest | |||||
| Year | 6% | 10% | 12% | 15% | 20% |
| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
| 2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
| 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
| 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
| 5 | 4.212 | 3.791 | 3.605 | 3.352 | 2.991 |
| 6 | 4.917 | 4.355 | 4.111 | 3.784 | 3.326 |
| 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
| 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
| 9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
| 10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
Compute the following:
a. The average rate of return, giving effect tostraight-line depreciation on the investment. If required, roundyour answer to one decimal place.
%
b. The cash payback period.
years
c. The net present value. Use the above tableof the present value of an annuity of $1. Round to the nearestdollar. If required, use a minus sign to indicate negative netpresent value" for current grading purpose.
| Present value of annual net cashflows | $ |
| Less amount to be invested | $ |
| Net present value | $ |
Average Rate of Return, Cash Payback Period, Net Present ValueMethod
Great Plains Railroad Inc. is considering acquiring equipment ata cost of $450,000. The equipment has an estimated life of 10 yearsand no residual value. It is expected to provide yearly net cashflows of $75,000. The company's minimum desired rate of return fornet present value analysis is 10%.
| Present Valueof an Annuity of $1 at Compound Interest | |||||
| Year | 6% | 10% | 12% | 15% | 20% |
| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
| 2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
| 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
| 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
| 5 | 4.212 | 3.791 | 3.605 | 3.352 | 2.991 |
| 6 | 4.917 | 4.355 | 4.111 | 3.784 | 3.326 |
| 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
| 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
| 9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
| 10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
Compute the following:
a. The average rate of return, giving effect tostraight-line depreciation on the investment. If required, roundyour answer to one decimal place.
%
b. The cash payback period.
Select3 years4 years5 years6 years7 yearsItem 2
c. The net present value. Use the above tableof the present value of an annuity of $1. Round to the nearestdollar.
| Present value of annual net cashflows | $ |
| Less amount to be invested | $ |
| Net present value | $ |
