Oriole Corporation is reviewing an investment proposal. The initial cost is $105,400. Estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the following schedule. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is assumed to equal its book value. There would be no salvage value at the end of the investment's life. Investment Proposal Book Annual Cash Annual Year Value Flows Net Income 1 $69,500 $44,600 $8,700 2 41,000 39,200 10,700 33 21,900 36,000 16,900 4 9,000 30,800 17,900 5 0 23,310 14,310 Oriole Corporation uses an 11% target rate of return for new investment proposals. Click here to view PV table. (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) Cash payback period years (b) What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50%.) Annual rate of return for the investment % (c) What is the net present value of the investment? (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses eg (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $
Oriole Corporation is reviewing an investment proposal. The initial cost is $105,400. Estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the following schedule. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is assumed to equal its book value. There would be no salvage value at the end of the investment's life. Investment Proposal Book Annual Cash Annual Year Value Flows Net Income 1 $69,500 $44,600 $8,700 2 41,000 39,200 10,700 33 21,900 36,000 16,900 4 9,000 30,800 17,900 5 0 23,310 14,310 Oriole Corporation uses an 11% target rate of return for new investment proposals. Click here to view PV table. (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) Cash payback period years (b) What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50%.) Annual rate of return for the investment % (c) What is the net present value of the investment? (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses eg (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Oriole Corporation is reviewing an investment proposal. The initial cost is $105,400. Estimates of the book value of the
investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in
the following schedule. All cash flows are assumed to take place at the end of the year. The salvage value of the
investment at the end of each year is assumed to equal its book value. There would be no salvage value at the end of the
investment's life.
Investment Proposal
Book
Annual
Cash
Annual
Year
Value
Flows
Net Income
1
$69,500
$44,600
$8,700
2
41,000
39,200
10,700
33
21,900
36,000
16,900
4
9,000
30,800
17,900
5
0
23,310
14,310
Oriole Corporation uses an 11% target rate of return for new investment proposals.
Click here to view PV table.
(a)
What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.)
Cash payback period
years
(b)
What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50%.)
Annual rate of return for the investment
%
(c)
What is the net present value of the investment? (If the net present value is negative, use either a negative
sign preceding the number e.g. -45 or parentheses eg (45). Round answer to 0 decimal places, e.g.
125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Net present value
$
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