Question

Vilas Company is considering a capital investment of $191,900 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 $16,000 and $49,800, 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 3.85 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 % (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 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present  

Answer 1

Initial Outlow Annual Case Tnglow Ca) Case ay bauk leiad $1911900 3. 85 yeaus ५१, ४०० Annual Rate of Retusin Annual Net Inceme X100 Capital Inestment $16000 8.34.1. 1 $191,900

Calculahien of Net Present Value (b) CArmeunt iw $) Present valee facter (h=1210) Cash lew Prvent Value year 491900) 1,41,1eo 1 441464 49,860 0.89286 1 .19119 49,8 60 39,1e0 O.7I18 49,800 35,447 O. 63552 49, 800 31,649 o.56743 49,800 28,258 Net Poesent Value 19,383) :. Net Poeseut value ($12,38 a)

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