Managerial Accounting: E26-11 Drake Corporation is reviewing an investment proposal

Managerial Accounting
E26-11
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 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 investment's life.
Investment Proposal
Year Initial Cost and Book Value Annual Cash Flows Annual Net Income
0 104,700
1 69,500 44,600 9,400
2 41,000 39,200 10,700
3 21,900 36,000 16,900
4 9,000 30,800 17,900
5 - 24,200 15,200
$174,800 $70,100
Drake Corporation uses an 11% target rate of return for new investment proposals.

a. What is the cash payback period for this proposal? (Tound answer to 2 decimal places, e.g. 10.50)
b. What is the annual rate of return for the investment?
c. What is the net present value of the investment?
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