DO IT1 Cash Payback Period Coponaion is considering adding amother machine for the manufacture of cor The machune would cost $900.000. Tr would have an estimated life of 6 years le The compuny estimates that annual cash inflows would inerease by S-400.00 tal cash outflows would increase by $190,000. Compute the cash payback period. ACTION PLAN Annual cash inflerws- Anmual eashs outfferws Net annual cash Herw Cash nav Fse Solution Please refer to the following exercise to demonstrate the above objectives. In addition, please show your calculations in the threads and assist others who may have challenges by discussing your analysis and calculations; Camer Company is considering a capital investment of $390,000 in additional productive facilities. The new machinery is expected to have useful life of 6 years with no salvage value. Depreciation is by the strainht-line method Duuring the life of the investment, annual net income and net annual cash flows are expected to be $20.000 and $85,000, respectively. Carper has an 8% cost of capital rate, which is the required rate of retu on the investment. Instructions (Round to two decimals.) a Compute (1) the cash payback period and (2) the annual rate of return on the proposed capital expenditure. b. Using the discounted cash flow technique, compute the net present value. c. Carper was presented with a second capital investment that provided similar production facilities as the first one. This investment cost $400,000, had a useful life of 7 years with a salvage value of $15,000. 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 $25,000 and $80,000 respectively. Carper's 8% cost of capital is also the required rate of return on the investment. 1. Compute the cash payback period. 2. Compute the annual rate of return. 3. Using the discounted cash flow technique, compute the net present value. 4. Based on these calculations, which investment do you recommend? Explain why.
DO IT1 Cash Payback Period Coponaion is considering adding amother machine for the manufacture of cor The machune would cost $900.000. Tr would have an estimated life of 6 years le The compuny estimates that annual cash inflows would inerease by S-400.00 tal cash outflows would increase by $190,000. Compute the cash payback period. ACTION PLAN Annual cash inflerws- Anmual eashs outfferws Net annual cash Herw Cash nav Fse Solution Please refer to the following exercise to demonstrate the above objectives. In addition, please show your calculations in the threads and assist others who may have challenges by discussing your analysis and calculations; Camer Company is considering a capital investment of $390,000 in additional productive facilities. The new machinery is expected to have useful life of 6 years with no salvage value. Depreciation is by the strainht-line method Duuring the life of the investment, annual net income and net annual cash flows are expected to be $20.000 and $85,000, respectively. Carper has an 8% cost of capital rate, which is the required rate of retu on the investment. Instructions (Round to two decimals.) a Compute (1) the cash payback period and (2) the annual rate of return on the proposed capital expenditure. b. Using the discounted cash flow technique, compute the net present value. c. Carper was presented with a second capital investment that provided similar production facilities as the first one. This investment cost $400,000, had a useful life of 7 years with a salvage value of $15,000. 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 $25,000 and $80,000 respectively. Carper's 8% cost of capital is also the required rate of return on the investment. 1. Compute the cash payback period. 2. Compute the annual rate of return. 3. Using the discounted cash flow technique, compute the net present value. 4. Based on these calculations, which investment do you recommend? Explain why.
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
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Transcribed Image Text:DO IT1 Cash Payback Period
Coponaion is considering adding amother machine for the manufacture of cor
The machune would cost $900.000. Tr would have an estimated life of 6 years
le The compuny estimates that annual cash inflows would inerease by S-400.00
tal cash outflows would increase by $190,000. Compute the cash payback period.
ACTION PLAN
Annual cash inflerws-
Anmual eashs outfferws Net
annual cash Herw
Cash nav Fse
Solution
Please refer to the following exercise to demonstrate the above objectives. In addition, please
show your calculations in the threads and assist others who may have challenges by discussing
your analysis and calculations;
Camer Company is considering a capital investment of $390,000 in additional productive facilities. The new
machinery is expected to have useful life of 6 years with no salvage value. Depreciation is by the strainht-line
method Duuring the life of the investment, annual net income and net annual cash flows are expected to be
$20.000 and $85,000, respectively. Carper has an 8% cost of capital rate, which is the required rate of retu
on the investment.
Instructions (Round to two decimals.)
a Compute (1) the cash payback period and (2) the annual rate of return on the proposed capital
expenditure.
b. Using the discounted cash flow technique, compute the net present value.
c. Carper was presented with a second capital investment that provided similar production facilities as
the first one. This investment cost $400,000, had a useful life of 7 years with a salvage value of
$15,000. 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 $25,000 and $80,000 respectively. Carper's 8%
cost of capital is also the required rate of return on the investment.
1. Compute the cash payback period.
2. Compute the annual rate of return.
3. Using the discounted cash flow technique, compute the net present value.
4. Based on these calculations, which investment do you recommend? Explain why.
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