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Metro Car Washes, Inc., is reviewing an investment proposal. The initial cost as well as...

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Accounting

Metro Car Washes, Inc., is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. 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 investments life.

Year Initial Cost and Book Value Annual Net After-Tax Cash Flows Annual Net Income
0 $ 105,000
1 70,000 $ 50,000 $ 15,000
2 42,000 45,000 17,000
3 21,000 40,000 19,000
4 7,000 35,000 21,000
5 0 30,000 23,000

Management uses a 16 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Exercise 16-37 Part 3

3. Compute the proposals net present value. (Round intermediate calculations to the nearest whole dollar.)

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