LO26-1, LO26-3 EXERCISE 26.3 Understanding Return on Average Investment Relationships Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments. B Investment cost $50,000 $75,000 $40,000 $? Estimated salvage value 10,000 15,000 2,000 Average estimated net income 9,000 6,000 8,000 Return on average investment ? 18% 25% 20%
LO26-1, LO26-3 EXERCISE 26.3 Understanding Return on Average Investment Relationships Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments. B Investment cost $50,000 $75,000 $40,000 $? Estimated salvage value 10,000 15,000 2,000 Average estimated net income 9,000 6,000 8,000 Return on average investment ? 18% 25% 20%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Solve for the missing information pertaining to each investment proposal.
Using the tables in Exhibit 26–3 determine the present value of the following cash flows , discounted at an annual rate of 15 percent.
$40,000 to be received 20 years from today.
$24,000 to be received annually for 10 years.
$16,000 to be received annually for five years, with an additional $20,000 salvage value expected at the end of the fifth year.
$30,000 to be received annually for the first three years, followed by $20,000 received annually for the next two years (total of five years in which cash is received)
Transcribed Image Text:LO26-1, LO26-3
EXERCISE 26.3
Understanding Return on Average Investment Relationships
Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments.
A
B
Investment cost
$50,000
$75,000
$40,000
$?
Estimated salvage value
10,000
15,000
2,000
Average estimated net income
9,000
6,000
8,000
Return on åverage investment
18%
25%
20%
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