cricket 11:33 PM east.cengagenow.com Basic Concepts Roberts Company is consideri

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cricket 11:33 PM east.cengagenow.com Basic Concepts Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Cash Expenses $2,293,200 2,293,200 2,293,200 2,293,200 2,293.200 ear Cash Revenues $2,981,160 2,981,160 2,981,160 2,981,160 2,981,160 The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required 1. Compute the project's payback period. If required, round your answer to two decimal places. 3.33 years 2. Compute the project's accounting rate of return Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box). 30 3. Compute the project's net present value assuming a required rate of return of 10 percent. When required, round your answer to the nearest dollar $31470S

Explanation / Answer

Roberts Company Year Investment Cash outflow Cash Revenue Cash Expenses Net Cash flow 0 -2293200 -2293200 1 -2293200 1 2981160 2293200 687960 0.909091 625418.2 2 2981160 2293200 687960 0.826446 568562 3 2981160 2293200 687960 0.751315 516874.5 4 2981160 2293200 687960 0.683013 469885.9 5 2981160 2293200 687960 0.620921 427169 Net Present Value 314710 2. Computation of Project's accounting rate of return =Average annual cash flow/Investment Cash Outflow =687960/2293200 30 3. Computation of Project's net present Value as per above table 314710 Note : Requirement 2 is correct as per your calculation. Requirement 3 has difference of $1 I feel that this is very simple & basic question but it needs be fixed as it has got some error otherwise even requirement 2 should be correct. It might be because of technical issues in answering part/s. Please let me know if there is alternative or different solution than this one

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