The following data are accumulated by Lone Star Security in evaluating two competing investment proposals. Category Surveillance Equipment Patrol Truck Amount of investment $40,000 $55,000 Useful life 8 years 11 years Estimated residual value $3,000 $6,000 Estimated total income over the useful life $25,000 $38,700 Determine the expected average rate of return for each proposal. Year Net Income Net Cash Flow Year 1 $43,500 $81,000 Year 2 26,500 64,000 Year 3 13,500 50,500 Year 4 2,900 40,000
The following data are accumulated by Lone Star Security in evaluating two competing investment proposals. Category Surveillance Equipment Patrol Truck Amount of investment $40,000 $55,000 Useful life 8 years 11 years Estimated residual value $3,000 $6,000 Estimated total income over the useful life $25,000 $38,700 Determine the expected average rate of return for each proposal. Year Net Income Net Cash Flow Year 1 $43,500 $81,000 Year 2 26,500 64,000 Year 3 13,500 50,500 Year 4 2,900 40,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
- The following data are accumulated by Lone Star Security in evaluating two competing investment proposals.
|
Category |
Surveillance Equipment |
Patrol Truck |
|
Amount of investment |
$40,000 |
$55,000 |
|
Useful life |
8 years |
11 years |
|
Estimated residual value |
$3,000 |
$6,000 |
|
Estimated total income over the useful life |
$25,000 |
$38,700 |
Determine the expected average
|
Year |
Net Income |
Net |
|
Year 1 |
$43,500 |
$81,000 |
|
Year 2 |
26,500 |
64,000 |
|
Year 3 |
13,500 |
50,500 |
|
Year 4 |
2,900 |
40,000 |
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