What is the cash payback period for this proposal? (Round answer to 2 decimal pl

Question

What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.)

CASH PAYBACK PERIOD ______________________YEARS

What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.)

ANNUAL RATE OF RETURN FOR THE INVESTMENT ____________%

What is the net present value of the investment? (Round answer to 0 decimal places, e.g. 125.)

NET PRESENT VALUE _________________$

BAP Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment’s life.
Investment Proposal Year Initial Cost
and Book Value Annual
Cash Flows Annual
Net Income 0 $105,190 1 69,220 $45,300 $9,330 2 42,350 39,100 12,230 3 21,260 35,300 14,210 4 6,840 29,300 14,880 5 0 24,600 17,760

BAP Corporation uses a 12% target rate of return for new investment proposals.

Click here to view the factor table.

(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Explanation / Answer

Year Cash Flows Discount factor @12% Discounted Cash Flows Cumulative cash flows Discount factor @22% Discounted Cash Flows Discount factor @21.99% Discounted Cash Flows 0 -105190 1 -105190 -105190 1 -105190 1 -105190 1 45300 0.89286 40446.56 -59890 0.81967 37131.15 0.81974 37134.19 2 39100 0.79720 31170.38 -20790 0.67186 26269.82 0.67197 26274.13 3 35300 0.71178 25125.92 14510 0.55071 19439.95 0.55084 19444.73 4 29300 0.63552 18620.74 43810 0.45140 13225.99 0.45155 13230.33 5 24600 0.56743 13958.75 68410 0.37000 9101.982 0.37015 9105.713 NPV 24132.35 -21.1045 -0.90404 Ans c NPV 24132 ans a Payback period= Payback Period = A +B/C A is the last period with a negative cumulative cash flow; B is the absolute value of cumulative cash flow at the end of the period A; C is the total cash flow during the period after A 2+(20790/35300) 2.59 years Ans Anc C Annual rate of return 22.62% is IRR where NPV is 0 By trial and error method Lets take 22% So its ver close to 0 NPV if we take 21.99% it would be very close to 0 So enter 21.99 or 22% as IRR

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.