Question

The following information applies to the questions displayed below.) Falcon Crest Aces (FCA), Inc., is considering the purchase of a small plane to use in its wing-walking demonstrations and aerial tour business. Varlous Information about the proposed Investment follows: $ $ Initial investment Useful life Salvage value Annual net income generated FCA's cost of capital 190,000 10 years 20,000 4.400 $ Assume straight line depreciation method is used.

Answer 1

mpeutation af accoumtang rate e return ARR Net incoe Tritial nvedent ARR B4400 lao oc0 ACCeceryng Yate oreturn 2.32 2 Campetation op paubact period paybact poied Iitialnuestsent Annual net cash infloco $190O00 21100 B B8 years 8.88 gears Paybact prriod 201000 19O000 10 year s 1O00 Depreciation

Angual net cashinlocs Net ancome t deprecfation Clon cash) LLp00t tooo 21400 3) Coopetation o NeV NPV preLent valee of eashanlous Itial nvestment 321400XPVAC@6For 10 years $20,000 PVA at the end oe1 year శీ ం,G00 21400x 36008 + 20 000x0 5584 La0000 $ 162673 $21 326 190000 $21326 NPY 4) Recompuetation ap NPv ifcastof capital coe Can use the aboue torrou) a 104 ear st -$2100XDVAR3 year 20,000XPVF at the end op1 Titial nuestmen

21400x 8.5302 tk 20000x0 u 190000 197428-3 NPV E The Paects RR betoeen 3/0 and 6.o