Net income Net annual cash flows $ b) Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, e.g. 10.50.)
Net income Net annual cash flows $ b) Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, e.g. 10.50.)
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
Concept explainers
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
Topic Video
Question
Hh.
Transcribed Image Text:Net income
Net annual cash flows
(b)
Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, eg. 10.50.)
4
Cash payback period
Annual rate of return:
years
Net present value $
%
(c)
Compute the net present value of the commuter service. (Round answer to O decimal places, e.g. 125. If the net present value is nega
use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displaye
factor table provided.)
Transcribed Image Text:Blossom Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the
students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Blossom, an
entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that
a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations.
Blossom has gathered the following investment information.
1.
2.
3
4.
5.
Five used vans would cost a total of $74,429 to purchase and would have a 3-year useful life with negligible salvage value.
Blossom plans to use straight-line depreciation.
Ten drivers would have to be employed at a total payroll expense of $48.900.
Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $15,900,
Maintenance $3,500, Repairs $4,400, Insurance $4,400, and Advertising $2,600.
Blossom has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is
15%. Use this rate for cost of capital.
4
Blossom expects each van to make 10 round trips weekly and carry an average of 6 students each trip. The service is
expected to operate 30 weeks each year, and each student will be charged $12 for a round-trip ticket.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
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
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
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…
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