Vilas Company is considering a capital investment of $190,600 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $12,700 and $49,600, respectively. Vilas 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 2 decimal places, e.g. 10.50.) Cash payback period 3.83 years Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.50.) Annual rate of return 6.66316894 %
Vilas Company is considering a capital investment of $190,600 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $12,700 and $49,600, respectively. Vilas 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 2 decimal places, e.g. 10.50.) Cash payback period 3.83 years Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.50.) Annual rate of return 6.66316894 %
Cornerstones of Cost Management (Cornerstones Series)
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Chapter19: Capital Investment
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![Vilas Company is considering a capital investment of $190,600 in additional productive facilities. The new machinery is expected to
have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual
net income and net annual cash flows are expected to be $12,700 and $49,600, respectively. Vilas 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 2 decimal places, e.g. 10.50.)
Cash payback period
3.83 years
Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.50.)
Annual rate of return
6.66316894 %](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F53d0f527-48b4-4bb5-b8b0-e7856dc89397%2Fc0d6ded4-6de2-4847-9efd-c5f548d99f79%2F33ivnj9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Vilas Company is considering a capital investment of $190,600 in additional productive facilities. The new machinery is expected to
have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual
net income and net annual cash flows are expected to be $12,700 and $49,600, respectively. Vilas 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 2 decimal places, e.g. 10.50.)
Cash payback period
3.83 years
Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.50.)
Annual rate of return
6.66316894 %
![Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.50.)
Annual rate of return
6.66316894 %
(b)
Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative sign
preceding the number e.g. -45 or parentheses e.g. (45). Round answer for present value to O decimal places, e.g. 125. For calculation purposes,
use 5 decimal places as displayed in the factor table provided.)
Net present value
178,796.90](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F53d0f527-48b4-4bb5-b8b0-e7856dc89397%2Fc0d6ded4-6de2-4847-9efd-c5f548d99f79%2Fi0m34n3_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.50.)
Annual rate of return
6.66316894 %
(b)
Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative sign
preceding the number e.g. -45 or parentheses e.g. (45). Round answer for present value to O decimal places, e.g. 125. For calculation purposes,
use 5 decimal places as displayed in the factor table provided.)
Net present value
178,796.90
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