Average Rate of Return, Cash Payback Period, Net Present Value Method Great Plai

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Average Rate of Return, Cash Payback Period, Net Present Value Method
Great Plains Transportation Inc. is considering acquiring equipment at a cost of $288,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $72,000. The company's minimum desired rate of return for net present value analysis is 15%.

retur for net present value analysis is 1596. Present Value of an Annuity of $1 at Compound Interest 10% 20% 0.9430.9090.893 0.870 0.833 2 1.833 1.7361.6901.6261,528 2.6732,4872.4022.283 2.106 3.4653.170 3.0372.8552.589 4.212 -3.791-3.605 3.352 2.991 4,9174,355 4.111 3.7843.326 5.582 . i 4.868 4.564 4.160 -3F605 6.2105.335 4.9684 4873.837 6.8025.7595.3294.772 4.031 7,3606.14556505.0194.192 Year 6% 12% 15% 4 5 6 7 10 Compute the following

Explanation / Answer

c Present vaue of net annual cash flows 361368 =72000*5.019 Less Amount to be invested 288000 Net present value 73368

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