Current Attempt in Progress Villas Company is considering a capital investment of $216,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $18,468 and $45,000, respectively. Vilas has a 12% cost of capital rate, which is the required rate of return on the investment. Click here to view the factor table. (a) Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.) Cash payback period 4.8 years Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.52%) Annual rate of return 17.1 % (b) Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative sign preceding the number eg.-45 or parentheses eg. (45). Round answer for present value to 0 decimal places, eg. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided)
Current Attempt in Progress Villas Company is considering a capital investment of $216,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $18,468 and $45,000, respectively. Vilas has a 12% cost of capital rate, which is the required rate of return on the investment. Click here to view the factor table. (a) Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.) Cash payback period 4.8 years Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.52%) Annual rate of return 17.1 % (b) Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative sign preceding the number eg.-45 or parentheses eg. (45). Round answer for present value to 0 decimal places, eg. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Current Attempt in Progress
Vilas Company is considering a capital investment of $216,000 in additional productive facilities. The new machinery is expected to
have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual
net income and net annual cash flows are expected to be $18,468 and $45,000, respectively. Vilas has a 12% cost of capital rate, which
is the required rate of return on the investment.
Click here to view the factor table.
(a)
Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)
Cash payback period
Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.52%)
Annual rate of return
4.8 years
Net present value
(b)
Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative sign
preceding the number e.g.-45 or parentheses e.g. (45). Round answer for present value to 0 decimal places, e.g. 125. For calculation purposes,
use 5 decimal places as displayed in the factor table provided.)
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