CoursHeroTranscribedText: P21.42 Payback; accounting rate of return; NPV: manufacturer [LO3] Terry's Tiles Lid is reviewing...
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CoursHeroTranscribedText: P21.42 Payback; accounting rate of return; NPV: manufacturer [LO3] Terry's Tiles Lid is reviewing a capital investment proposal. The initial cost of the project [LO6] and the net cash flows for each year are presented in the schedule below. It is estimated that there would be no salvage value at the end of the investment's life. Initial cost and Annual net Annual Year carrying amount cash flows net profit 0 $105000 70 000 $50 000 $15000 42 000 45000 17000 3 21 000 40 000 19000 7000 35 000 21 000 0 30 000 23000 Terry's uses a required rate of return of 16 per cent to evaluate new capital investment proposals. Required: 1 Calculate the project's payback period. 2 Calculate the accounting rate of return on the investment proposal. Base your calculation on the initial cost of the investment. 3 Calculate the proposal's net present value
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