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Icasc show your calculations in the threads and assist others who may have challenges by discussing your analysis and calculations; Carper 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 straight-line method. During 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 return 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.

Icasc show your calculations in the threads and assist others who may have challenges by discussing your analysis and calculations; Carper 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 straight-line method. During 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 return 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.

FINANCIAL ACCOUNTING
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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Icasc show your calculations in the threads and assist others who may have challenges by discussing your analysis and calculations; Carper 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 straight-line method. During 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 return 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.
Transcribed Image Text:Icasc show your calculations in the threads and assist others who may have challenges by discussing your analysis and calculations; Carper 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 straight-line method. During 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 return 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.
wi the mwessine 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 Forum: Accounting Discussion Chapter 25 Capital Investments... 5/3/2020 $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.
Transcribed Image Text:wi the mwessine 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 Forum: Accounting Discussion Chapter 25 Capital Investments... 5/3/2020 $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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