Question

Part 1:

Park Co. is considering an investment that requires immediate payment of $29,500 and provides expected cash inflows of $14,400 annually for four years. What is the investment's payback period?

	Payback Period Choose Numerator: / Choose Denominator: = Payback Period / = Payback period = 0

Part 2:

Park Co. is considering an investment that requires immediate payment of $21,530 and provides expected cash inflows of $6,500 annually for four years. If Park Co. requires a 7% return on its investments.

1-a. What is the internal rate of return? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)

Part 3:

Peng Company is considering an investment expected to generate an average net income after taxes of $3,400 for three years. The investment costs $50,400 and has an estimated $10,200 salvage value.

Assume Peng requires a 10% return on its investments. Compute the net present value of this investment. Assume the company uses straight-line depreciation. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign.)

	Cash Flow Select Chart Amount x PV Factor = Present Value Annual cash flow = $0 Residual value = 0 Net present value

Answer 1

Part 1:

Choose Numerator:	/	Choose Denominator:	=	Payback Period
Intial Investment	/	Annual Cah flow	=	Payback Period
29500	/	14400	=	2.05

Part 2

Present Value factor	3.31231
Internal rate of return	8%

=21530/6500=3.31231

Part 3:

Cash Flow	Select Chart	Amount	x	PV Factor	=	Present Value
Annual cash flow	Present value of annuity of 1	16800		2.48685	=	41,779.11
Residual value	Present value of 1	10200		0.75131	=	7,663.41
Present Value of Cash Inflow						49,442.52
Immediate Cash Outflow						-50400
Net Present value						-957.48