Reference no: EM133348460

Question: Bonita Corporation is reviewing an investment proposal. The schedule below presents the initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year. All cash flows are assumed to take place at the end of the year. The investment's salvage value 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		$105,200
1		69,100			$50,700			$14,600
2		41,300			44,800			16,000
3		20,100			40,700			19,400
4		9,000			35,000			21,900
5		0			29,400			23,600

Bonita Corporation uses a 15% target rate of return for new investment proposals.

(a)What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 12.52.)

Cash payback period

enter the cash payback period in years rounded to 2 decimal places

years

Q2 The Sunland Inn is trying to determine its break-even point. The inn has 74 rooms available that are rented at $60 a night. Operating costs are as follows:

Salaries		$12,820	per month		Maintenance		$540	per month
Utilities		$1,950	per month		Housekeeping service		$6	per room
Depreciation		$1,970	per month		Other costs		$30	per room

(a) Determine the inn's break-even point in the number of rented rooms per month and dollars.

Break-even point		enter a number of rooms	rooms
Break-even point		$enter the break-even point in dollars