Drake Corporation is reviewing an investment proposal. The initial cost is $107,700. Estimates of the...
90.2K
Verified Solution
Link Copied!
Question
Accounting
Drake Corporation is reviewing an investment proposal. The initial cost is $107,700. 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 assumed to equal its book value. There would be no salvage value at the end of the investments life.
Investment Proposal
Year
Book Value
AnnualCash Flows
AnnualNet Income
1
$69,300
$45,700
$7,300
2
41,600
40,400
12,700
3
21,300
36,000
15,700
4
8,200
31,000
17,900
5
0
24,605
16,405
Drake Corporation uses an 11% target rate of return for new investment proposals.
what is the cash payback period in years?
what is the annual rate of return for the investment?
what is the net present value of the return?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!