LO26-1, LO26-3 EXERCISE 26.3 Understanding Return on Average Investment Relationships Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments. B Investment cost $50,000 $75,000 $40,000 $? Estimated salvage value 10,000 15,000 2,000 Average estimated net income 9,000 6,000 8,000 Return on average investment ? 18% 25% 20%
LO26-1, LO26-3 EXERCISE 26.3 Understanding Return on Average Investment Relationships Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments. B Investment cost $50,000 $75,000 $40,000 $? Estimated salvage value 10,000 15,000 2,000 Average estimated net income 9,000 6,000 8,000 Return on average investment ? 18% 25% 20%
Accounting
27th Edition
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 26.20EX
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Question
Solve for the missing information pertaining to each investment proposal.
Using the tables in Exhibit 26–3 determine the present value of the following cash flows, discounted at an annual rate of 15 percent.
$40,000 to be received 20 years from today.
$24,000 to be received annually for 10 years.
$16,000 to be received annually for five years, with an additional $20,000 salvage value expected at the end of the fifth year.
$30,000 to be received annually for the first three years, followed by $20,000 received annually for the next two years (total of five years in which cash is received)
Transcribed Image Text:LO26-1, LO26-3
EXERCISE 26.3
Understanding Return on Average Investment Relationships
Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments.
A
B
Investment cost
$50,000
$75,000
$40,000
$?
Estimated salvage value
10,000
15,000
2,000
Average estimated net income
9,000
6,000
8,000
Return on åverage investment
18%
25%
20%
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