Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
100%
Compute for the following:
1. Accounting rate or return based on the average investment
2.
3. Traditional Payback Period
![Question
[Fact Pattem #16]
A proposed investment is not expected to have any salvage
value'at the end of its 5-year life. For present valué
purposes, cash flows are assumed to occur at the end of
each year. The company uses a 12% after-tax target rate
of return.
Purchase Cost Annual Net After- Annual
Year and Book Value Tax Cash Flows Net Income
$ 0
240,000
$ 0
70,000
78,000
86,000
94,000
$500,000
336,000
1
216,000
192,000
168,000
144,000
Discount Factors for a 12% Rate of Return
Present Value of $1 at Present Value of an Annuity of
Year the End of Each Period $1 at the End of Each
2
200,000
100,000
36,000
4
102,000
Period
89
80
89
1.69
2
71
.64
2.40
3.04
4
.57
3.61
6
51
4.12
1N34 56](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8a87bc86-7fb0-4211-bf2c-5f4a734f3bc6%2F8979f8da-efa1-4201-bb03-ecbe34670ef8%2Fd4hjdti_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question
[Fact Pattem #16]
A proposed investment is not expected to have any salvage
value'at the end of its 5-year life. For present valué
purposes, cash flows are assumed to occur at the end of
each year. The company uses a 12% after-tax target rate
of return.
Purchase Cost Annual Net After- Annual
Year and Book Value Tax Cash Flows Net Income
$ 0
240,000
$ 0
70,000
78,000
86,000
94,000
$500,000
336,000
1
216,000
192,000
168,000
144,000
Discount Factors for a 12% Rate of Return
Present Value of $1 at Present Value of an Annuity of
Year the End of Each Period $1 at the End of Each
2
200,000
100,000
36,000
4
102,000
Period
89
80
89
1.69
2
71
.64
2.40
3.04
4
.57
3.61
6
51
4.12
1N34 56
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education