Average Rate of Return, Cash Payback Period, Net Present Value Method Southwest Transportation Inc. is considering a distribution facility at a cost of $195,000. The facility has an estimated life of 10 years and a no residual value. It is expected to provide yearly net cash flows of $39,000. The company's minimum desired rate of return for net present value analysis is 10%. Click here to access the present value tables (Exhibit 2 and Exhibit 5) to use for this problem. a. Compute average rate of return, giving effect to straight-line depreciation on the investment. Round to one decimal place. fill in the blank 1 % b. Compute the cash payback period. fill in the blank 2 years c. Compute the net present value. If required, use the minus to indicate a negative net present value. Total present value of annual net cash flows $fill in the blank 3 Less: amount to be invested fill in the blank 4 Equals: net present value $fill in the blank 5
Average
Southwest Transportation Inc. is considering a distribution facility at a cost of $195,000. The facility has an estimated life of 10 years and a no residual value. It is expected to provide yearly net cash flows of $39,000. The company's minimum desired rate of return for net present value analysis is 10%.
Click here to access the present value tables (Exhibit 2 and Exhibit 5) to use for this problem.
a. Compute average rate of return, giving effect to straight-line
fill in the blank 1 %
b. Compute the cash payback period.
fill in the blank 2 years
c. Compute the net present value. If required, use the minus to indicate a negative net present value.
| Total present value of annual net cash flows | $fill in the blank 3 |
| Less: amount to be invested | fill in the blank 4 |
| Equals: net present value | $fill in the blank 5 |
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