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Average Rate of Return, Cash Payback Period, Net Present Value Method Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $104,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $52,000o. The company's minimum desired rate of return for net present value analysis is 15%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.893 0.833 1 0.943 0.909 0.870 2. 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 3.170 4 3.465 3.037 2.855 2.589 2.991 4.212 3.791 3.605 3.353 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 5.759 4.772 6.802 5.328 4.031 7.360 6.145 10 5.650 5.019 4.192 Compute the following: a. The average rate of return, assuming the annual earnings are equal to the net cash flows less the annual depreciation expense on the equipment. If required, round your answer to one decimal place b. The cash payback period years c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar. If required, use a minus sign to indicate negative net present value" for current grading purpose. Present value of annual net cash flows Less amount to be invested Net present value

Average Rate of Return, Cash Payback Period, Net Present Value Method Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $104,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $52,000o. The company's minimum desired rate of return for net present value analysis is 15%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.893 0.833 1 0.943 0.909 0.870 2. 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 3.170 4 3.465 3.037 2.855 2.589 2.991 4.212 3.791 3.605 3.353 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 5.759 4.772 6.802 5.328 4.031 7.360 6.145 10 5.650 5.019 4.192 Compute the following: a. The average rate of return, assuming the annual earnings are equal to the net cash flows less the annual depreciation expense on the equipment. If required, round your answer to one decimal place b. The cash payback period years c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar. If required, use a minus sign to indicate negative net present value" for current grading purpose. Present value of annual net cash flows Less amount to be invested Net present value

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 3BE
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Average Rate of Return, Cash Payback Period, Net Present Value Method Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $104,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $52,000o. The company's minimum desired rate of return for net present value analysis is 15%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.893 0.833 1 0.943 0.909 0.870 2. 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 3.170 4 3.465 3.037 2.855 2.589 2.991 4.212 3.791 3.605 3.353 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 5.759 4.772 6.802 5.328 4.031 7.360 6.145 10 5.650 5.019 4.192 Compute the following: a. The average rate of return, assuming the annual earnings are equal to the net cash flows less the annual depreciation expense on the equipment. If required, round your answer to one decimal place
Transcribed Image Text:Average Rate of Return, Cash Payback Period, Net Present Value Method Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $104,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $52,000o. The company's minimum desired rate of return for net present value analysis is 15%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.893 0.833 1 0.943 0.909 0.870 2. 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 3.170 4 3.465 3.037 2.855 2.589 2.991 4.212 3.791 3.605 3.353 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 5.759 4.772 6.802 5.328 4.031 7.360 6.145 10 5.650 5.019 4.192 Compute the following: a. The average rate of return, assuming the annual earnings are equal to the net cash flows less the annual depreciation expense on the equipment. If required, round your answer to one decimal place
b. The cash payback period years c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar. If required, use a minus sign to indicate negative net present value" for current grading purpose. Present value of annual net cash flows Less amount to be invested Net present value
Transcribed Image Text:b. The cash payback period years c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar. If required, use a minus sign to indicate negative net present value" for current grading purpose. Present value of annual net cash flows Less amount to be invested Net present value
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