Blossom Corporation is reviewing an investment proposal. The initial cost is $105,700. Estimates of the book value of the investmentat the end of each year, the net cash flows for each year, and the net income for each year are presented in the following schedule. Allcash 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 toequal its book value. There would be no salvage value at the end of the investment's life.Investment ProposalAnnualYearBook ValueCash FlowsAnnualNet Income1$70,500$44,900$9,700242,40039,20011,100320,60036,00014,20046,80029,10015,3005025,20518,405Blossom Corporation uses an 11% target rate of return for new investment proposals.1

(a). Cash Payback Period: Cash Payback Period=Years before break−even+Unrecovered amount/Cash flow…

Answered: Blossom Corporation is reviewing an…

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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Drake Corporation is reviewing an investment proposal. The initial cost is $105,100. 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 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 equal its book value. There would be no salvage value at the end of the investment’s life. Investment Proposal Year Book Value AnnualCash Flows AnnualNet Income 1 $69,600 $44,000 $8,500 2 41,900 39,500 11,800 3 21,600 36,000 15,700 4 8,300 31,000 17,700 5 0 22,915 14,615 Drake Corporation uses an 11% target rate of return for new investment proposals.Click here to view the factor table.(a)What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) Cash…
Crane Corporation is reviewing an investment proposal. The initial cost is $104,600. 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 are presented in the following schedule. 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 equal its book value. There would be no salvage value at the end of the investment's life. Year 1 2 3 4 5 Book Value Investment Proposal $69,900 41,000 (b) 21,000 7,600 0 Annual Cash Flows Click here to view PV table. Cash payback period $46,000 40,600 36,000 31,000 24,220 Annual Net Income $11,300 11,700 Crane Corporation uses an 11% target rate of return for new investment proposals. Annual rate of return for the investment 16,000 17,600 (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) 16,620 3 years What is the annual rate of return…
Oriole Corporation is reviewing an investment proposal. The initial cost is $105,400. 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 are presented in the following schedule. 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 equal its book value. There would be no salvage value at the end of the investment's life. Investment Proposal Book Annual Cash Annual Year Value Flows Net Income 1 $69,500 $44,600 $8,700 2 41,000 39,200 10,700 33 21,900 36,000 16,900 4 9,000 30,800 17,900 5 0 23,310 14,310 Oriole Corporation uses an 11% target rate of return for new investment proposals. Click here to view PV table. (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) Cash payback period years (b) What is the annual rate of return for the investment? (Round answer to 2…
Drake Corporation is reviewing an investment proposal. The initial cost is $105,700. 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 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 equal its book value. There would be no salvage value at the end of the investment's life. Year 1 2 3 4 Investment Proposal Book Value $70,500 42,400 20,600 6,800 Annual Annual Cash Flows Net Income $9,700 11.100, $44,900 39.200 36,000 29,100 25,205 14,200 15,300 18,405 Drake Corporation uses an 11% target rate of return for new investment proposals. Click here to view the factor table. SU
Wade Corporation is reviewing an investment proposal. The initial cost is $105,000. 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 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 equal to its book value. There would be no salvage value at the end of the investment's life. Year 1 2 3 4 5 Investment Proposal Annual Book Value Cash Flows $70,000 42,000 21,000 7,000 0 $45,000 40,000 35,000 30,000 25,000 Annual Net Income $16,000 18,000 20,000 22,000 24,000 Wade Corporation uses a 15% target rate of return for new investment proposals. a. What is the cash payback period for this proposal? b. What is the annual rate of return for the investment? c. What is the net present value of the investment?
Drake Corporation is reviewing an investment proposal. 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 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 equal to its book value. There would be no salvage value at the end of the investment’s life. Investment Proposal Year Initial Costand Book Value AnnualCash Flows AnnualNet Income 0 $105,900 1 69,300 $44,100 $7,500 2 42,600 40,300 13,600 3 20,000 35,000 12,400 4 6,500 29,800 16,300 5 0 24,400 17,900 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, e.g. 10.50.) Cash payback…
Vishanu
Metro Car Washes, Inc., is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment 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. Year 0 1 2 3 Initial Cost and Book Value $240,000 160,000 96,000 48,000 16,000 Annual Net After-Tax Cash Flows Exercise 16-37 Part 3 $103,000 89,000 75,000 61,000 47,000 Annual Net Income $23,000 25,000 27,000 29,000 31,000 Management uses a 14 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) 3. Compute the proposal's net present value. (Round intermediate calculations to the nearest whole dollar.) Net present value
Vishnu
Kansas Corporation is reviewing an investment proposal that has an initial cost of $54,000. An estimate of the investment's end-of- year book value, the yearly after-tax net cash inflows, and the yearly net income are presented in the schedule below. Yearly after-tax net cash inflows include savings from the depreciation tax shield. The investment's salvage value at the end of each year is equal to book value, and there will be no salvage value at the end of the investment's life. $35,500 Yearly After-Tax Net cash Inflows Initial Cost and Year 1 Book Value $20,500 2 21,500 18,000 3 11,000 15,500 4 4,000 13,000 5 0 10,500 $77,500 Yearly Net Income $ 3,000 4,000 5,000 6,000 7,000 $25,000 Kansas uses a 12% after-tax target rate of return for new investment proposals. FV of $1 at FV of an ordinary PV of $1 at PV of an ordinary 1123456 Year - 12% annuity at 12% 12% annuity at 12% 1.120 1.000 0.893 0.893 1.254 2.120 0.797 1.690 1.405 3.374 0.712 2.402 1.574 4.779 0.636 3.037 1.762 6.353…
Required information [The following information applies to the questions displayed below.] Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment 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. Year 0 1 2 3 4 5 Initial Cost and Book Value $345,000 230,000 138,000 69,000 23,000 0 Annual Net After-Tax Cash Flows $162,000 141,000 120,000 99,000 78,000 Annual Net Income $47,000 49,000 51,000 53,000 55,000 Management uses a 14 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the project's payback period. Assume that the cash flows in…
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