Metro Car Washes, Inc., is reviewing an investment proposal. The initial cost as well as...
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Accounting
Metro Car Washes, Inc., is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. 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.
Year
Initial Cost and Book Value
Annual Net After-Tax Cash Flows
Annual Net Income
0
$
105,000
1
70,000
$
50,000
$
15,000
2
42,000
45,000
17,000
3
21,000
40,000
19,000
4
7,000
35,000
21,000
5
0
30,000
23,000
Management uses a 16 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)
Exercise 16-37 Part 3
3. Compute the proposals net present value. (Round intermediate calculations to the nearest whole dollar.)
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