Mouser Company is evaluating a capital expenditure proposal with the following predicted cash flows:
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Initial investment:
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$110,000
|
|
Operations:
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|
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Year 1
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$40,000
|
|
Year 2
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30,000
|
|
Year 3
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55,000
|
|
Salvage value:
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-0-
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Additional information for interest rate of 12 percent:
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Present value of $1 - year 1
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0.893
|
|
Present value of $1 - year 2
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0.797
|
|
Present value of $1 - year 3
|
0.712
|
|
Present value of an annuity of $1, (3 periods)
|
2.402
|
Required: Determine the following values:
a. Net present value of the investment at a discount rate of 12 percent
b. Payback period
c. Accounting rate of return using average investment