Required information [The following information applies to the questions displayed below.] Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after- tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Annual Net After-Tax Year Initial Cost and Book Value 012345 $210,000 140,000 84,000 42,000 14,000 0 Cash Flows Annual Net Income $99,000 $29,000 87,000 31,000 75,000 33,000 63,000 35,000 51,000 37,000 Management uses a 10 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) 2. Calculate the accounting rate of return on the investment proposal. Base your calculation on the initial cost of the investment. (Round your "Percentage" answer to 2 decimal place (i.e., .1234 should be entered as 12.3).) Accounting rate of return %
Required information [The following information applies to the questions displayed below.] Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after- tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Annual Net After-Tax Year Initial Cost and Book Value 012345 $210,000 140,000 84,000 42,000 14,000 0 Cash Flows Annual Net Income $99,000 $29,000 87,000 31,000 75,000 33,000 63,000 35,000 51,000 37,000 Management uses a 10 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) 2. Calculate the accounting rate of return on the investment proposal. Base your calculation on the initial cost of the investment. (Round your "Percentage" answer to 2 decimal place (i.e., .1234 should be entered as 12.3).) Accounting rate of return %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Am120.
![Required information
[The following information applies to the questions displayed below.]
Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as
the estimate of the book value of the investment at the end of each year, the net after-
tax cash flows for each year, and the net income for each year are presented in the
following schedule. The salvage value of the investment at the end of each year is equal
to its book value. There would be no salvage value at the end of the investment's life.
Annual Net After-Tax
Year
Initial Cost
and Book Value
012345
$210,000
140,000
84,000
42,000
14,000
0
Cash Flows
Annual
Net Income
$99,000
$29,000
87,000
31,000
75,000
33,000
63,000
35,000
51,000
37,000
Management uses a 10 percent after-tax target rate of return for new investment
proposals.
Use Appendix A for your reference. (Use appropriate factor(s) from the tables
provided.)
2. Calculate the accounting rate of return on the investment proposal. Base your calculation on the initial
cost of the investment. (Round your "Percentage" answer to 2 decimal place (i.e., .1234 should be
entered as 12.3).)
Accounting rate of return
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F35d48ec7-b72d-4427-9aef-78441c68b217%2Fd98d4006-5f87-40ec-b65d-1fc4646c2606%2F6vv2dah_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as
the estimate of the book value of the investment at the end of each year, the net after-
tax cash flows for each year, and the net income for each year are presented in the
following schedule. The salvage value of the investment at the end of each year is equal
to its book value. There would be no salvage value at the end of the investment's life.
Annual Net After-Tax
Year
Initial Cost
and Book Value
012345
$210,000
140,000
84,000
42,000
14,000
0
Cash Flows
Annual
Net Income
$99,000
$29,000
87,000
31,000
75,000
33,000
63,000
35,000
51,000
37,000
Management uses a 10 percent after-tax target rate of return for new investment
proposals.
Use Appendix A for your reference. (Use appropriate factor(s) from the tables
provided.)
2. Calculate the accounting rate of return on the investment proposal. Base your calculation on the initial
cost of the investment. (Round your "Percentage" answer to 2 decimal place (i.e., .1234 should be
entered as 12.3).)
Accounting rate of return
%
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