60.1K

Verified Solution

Link Copied!

Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $136,000. The equipment has an estimated te of 10 ynars and no residual value. It is expected to provide yearly net cash flows of $34,000. The company's minimum desired rate of retum for net present value analysis is 12% Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 1.626 2. 1.833 0.833 1.528 1.736 1.690 3 2.673 2.487 2.283 2.106 2.402 3.037 4 3.465 3.170 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.355 4.111 3.326 4.917 5.582 3.785 4.160 7 4.868 4.564 3.605 3.837 8 6.210 5.335 4.968 4.487 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. % c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar. If required, use a minus sign to indicate negative net present value for current grading purpose. Present value of annual net cash flows Amount to be invested Net present value

Answer & Explanation Solved by verified expert

See Answer