Solution-What is the net present value of the investment

What is the net present value of the investment

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Reference no: EM132467687

BAP Corporation is reviewing an investment proposal. The initial cost and esti¬mates 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 are presented in the schedule below. All cash slows 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 $105,000	Annual Cash Flows	Annual Net Income
0		Annual Cash Flows	Annual Net Income
0
1	70,000	$45,000	$10,000
2	42,000	40,000	12,000
3	21,000	35,000	14,000
4	7,000	30,000	16,000
5	0	25,000	• 18,000

BAP Corporation uses a 12% target rate of return for new investment proposals.

Instructions

Question (a) What is the cash payback period for this proposal?

Question (b) What is the annual rate of return for the investment?

Question (c) What is the net present value of the investment

Reference no: EM132467687

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What is the net present value of the investment

Reference no: EM132467687

Reference no: EM132467687

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