Riverbed Company is considering a capital investment of $439,420 in additional productive facilities. The new machinery is expe to have a useful life of 5 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash flows are expected to be $41,000 and $127,000, respectively. Riverbed has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment. Click here to view PV tables. (a) Compute the annual rate of return. (Round answer to 1 decimal place, e.g. 15.5.) Annual rate of return % Compute the cash payback period on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period years

Riverbed Company is considering a capital investment of $439,420 in additional productive facilities. The new machinery is expe to have a useful life of 5 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash flows are expected to be $41,000 and $127,000, respectively. Riverbed has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment. Click here to view PV tables. (a) Compute the annual rate of return. (Round answer to 1 decimal place, e.g. 15.5.) Annual rate of return % Compute the cash payback period on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period years

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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Sunland Company is considering a capital investment of $398,400 in additional productive facilities. The new machinery is expected to have a useful life of 6 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annuali net income and net annual cash flows are expected to be $21,912 and $83.000, respectively. Sunland has an 6% cost of capital rate. which is the required rate of return on the investment. (a1) Your answer has been saved. See score details after the due date. Compute the cash payback period. (Round answer to 2 decimal places, e.g. 2.25.) Cash payback period Using the discounted cash flow technique, compute the net present value. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places eg. 589.71.) Net present value 48 years Save for Later Attempts: 0 of 1 used Submit Answer