Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book...
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Accounting
Drake Corporation is reviewing an investment proposal. The initial cost and 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 equal to its book value. There would be no salvage value at the end of the investments life.
Investment Proposal
Year
Initial Cost and Book Value
AnnualCash Flows
AnnualNet Income
0
$104,100
1
70,500
$44,900
$11,300
2
42,400
39,200
11,100
3
20,600
34,600
12,800
4
6,800
29,100
15,300
5
0
24,600
17,800
Drake Corporation uses an 11% target rate of return for new investment proposals.
What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50.)
Annual rate of return for the investment
%
I received the incorrect answer of 13.12% and please how the step-by-step process! Thank you!
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