Riverbed Company is considering a capital investment of $439,420 in additional productive facilities. The new machinery is expe to have a useful life of 5 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash flows are expected to be $41,000 and $127,000, respectively. Riverbed has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment. Click here to view PV tables. (a) Compute the annual rate of return. (Round answer to 1 decimal place, e.g. 15.5.) Annual rate of return % Compute the cash payback period on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period years
Riverbed Company is considering a capital investment of $439,420 in additional productive facilities. The new machinery is expe to have a useful life of 5 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash flows are expected to be $41,000 and $127,000, respectively. Riverbed has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment. Click here to view PV tables. (a) Compute the annual rate of return. (Round answer to 1 decimal place, e.g. 15.5.) Annual rate of return % Compute the cash payback period on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period years
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
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
Transcribed Image Text:Riverbed Company is considering a capital investment of $439,420 in additional productive facilities. The new machinery is expected
to have a useful life of 5 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the
investment, annual net income and cash flows are expected to be $41,000 and $127,000, respectively. Riverbed has a 12% cost of
capital rate, which is the minimum acceptable rate of return on the investment.
Click here to view PV tables.
(a)
Compute the annual rate of return. (Round answer to 1 decimal place, e.g. 15.5.)
Annual rate of return
%
Compute the cash payback period on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 15.25.)
Cash payback period
years
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