i.2 Sunland Company is considering a capital investment of $208,000 in additional productive facilities. The new machinery is expected tohave a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annualnet income and net annual cash flows are expected to be $15,080 and $52,000, respectively. Sunland has a 12% cost of capital rate,which is the required rate of return on the investment.Click here to view PV table.(a)Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)Cash payback periodCompute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.52%.)Annual rate of return(b)3.8 yearsNet present value%Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative signpreceding the number e.g. -45 or parentheses e.g. (45). Round answer for present value to 0 decimal places, e.g. 125. For calculation purposes,use 5 decimal places as displayed in the factor table provided.)

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Description: i.2 Sunland Company is considering a capital investment of $208,000 in additional productive facilities. The new machinery is expected tohave a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life

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Sunland Company is considering a capital investment of $208,000 in additional productive facilities. The new machinery is expected have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annua net income and net annual cash flows are expected to be $15,080 and $52,000, respectively. Sunland has a 12% cost of capital rate, which is the required rate of return on the investment. Click here to view PV table. (a) Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)

Sunland Company is considering a capital investment of $208,000 in additional productive facilities. The new machinery is expected have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annua net income and net annual cash flows are expected to be $15,080 and $52,000, respectively. Sunland has a 12% cost of capital rate, which is the required rate of return on the investment. Click here to view PV table. (a) Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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