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(a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 12.52.) Cash payback period years

(a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 12.52.) Cash payback period years

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vishanu

MCA Corporation is reviewing an investment proposal. The schedule below presents 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. All cash flows are assumed to take place at the end of the year. The investment's salvage value 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 Year 0 1 2 3 4 5 Initial Cost and Book Value $104,000 69,000 41,000 20,000 6,000 0 Annual Cash Flows Annual Net Income $49,000 44,000 39,000 34,000 29,000 MCA Corporation uses a 15% target rate of return for new investment proposals. $14,000 16,000 18,000 years 20,000 22,000 ▼ (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 12.52.) Cash payback period
Transcribed Image Text:MCA Corporation is reviewing an investment proposal. The schedule below presents 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. All cash flows are assumed to take place at the end of the year. The investment's salvage value 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 Year 0 1 2 3 4 5 Initial Cost and Book Value $104,000 69,000 41,000 20,000 6,000 0 Annual Cash Flows Annual Net Income $49,000 44,000 39,000 34,000 29,000 MCA Corporation uses a 15% target rate of return for new investment proposals. $14,000 16,000 18,000 years 20,000 22,000 ▼ (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 12.52.) Cash payback period
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