Blossom Company is considering a capital investment of $216,000 in additional productive facilities. The new machinery i
Posted: Thu Apr 28, 2022 10:59 am
Blossom Company is considering a capital investment of $216,000
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 $18,468 and $45,000, respectively. Blossom has a 12%
cost of capital rate, which is the required rate of return on the
investment. Click here to view the factor table. (a) Compute the
cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)
Cash payback period enter the cash payback period in years rounded
to 1 decimal place 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 enter the annual rate of return
in percentages rounded to 2 decimal places % (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 enter the net present
value in dollars rounded to 0 decimal places
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 $18,468 and $45,000, respectively. Blossom has a 12%
cost of capital rate, which is the required rate of return on the
investment. Click here to view the factor table. (a) Compute the
cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)
Cash payback period enter the cash payback period in years rounded
to 1 decimal place 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 enter the annual rate of return
in percentages rounded to 2 decimal places % (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 enter the net present
value in dollars rounded to 0 decimal places