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Cullumber Company is considering a capital investment of $183,300 in additional productive facilities. The new...

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Accounting

Cullumber Company is considering a capital investment of $183,300 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $10,998 and $47,000, respectively. Cullumber has a 12% cost of capital rate, which is the required rate of return on the investment.
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(a)
Compute the cash payback period. (Round answer to 1 decimal place, e.g.10.5.)
Cash payback period
years
Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g.10.52%.)
Annual rate of return
%
(b)
Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative sign preceding the number e.g.-45 or parentheses e.g.(45). Round answer for present value to 0 decimal places, e.g.125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Net present value
image

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