The management of Nebraska Corporation is considering the purchase of a The comp
ID: 2587583 • Letter: T
Question
The management of Nebraska Corporation is considering the purchase of a The company's desired rate of return is 10%. The for I through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In information, use the following data in determining the acceptability in this sit present value factors for $1 at compound interest of 10% Income from Operations $100,000 40,000 40,000 10,000 10,000 Net Cash $180,000 120,000 100,000 90,000 120,000 19- The average rate of return for this investment is: a. b. C. d. 16% 58% 18% 10% Below is a table for the present value of $1 at compound interest. 10% 909 826 751 683 .621 12% 893 797 .712 .636 567 Year 6% 943 890 840 792 747 Below is a table for the present value of an annuity of SI at compound interest. 12% .893 1.690 2.402 3.037 3.605 10% 6% 943 1.833 2.673 3.465 4.212 Year 1.736 2.487 3.170 3.791 Using the tables above, what is the present value of S6.000 (rounded to the nearest dollar) to be received at the end of each of the next 4 years, assuming an earnings rate of 10%? a. $14,412 b. $25.272 c. $20,790 d. $19,020 20.Explanation / Answer
1) The average rate of return for this investment is 16%
Solution: Cash payback period for this investment is 4 years with an average rate of return for this investment to be 16%
2) Using the tables above what is the presnt value of $6,000 to be recieved at the end of each of the next 4 years, assuming an earning rate of 10%
Solution: 19,020
Working: 6000 * 3.17 = 19020
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