Chapter 11

Problem 1.

Blue Marlin Company is considering the purchase of new equipment for its factory. It will cost $250,000 and have a $50,000 salvage value in five years. The annual net income from the equipment is expected to be $25,000, and depreciation is $40,000 per year

Calculate Blue Marlins annual rate of return and payback period for the equipment. (Round your Payback Period to 2 decimal places.)

Annual Rate of Return		%
Payback Period		Years

Problem 2.

Citrus Company is considering a project that has estimated annual net cash flows of $32,000 for six years and is estimated to cost $150,000. Citruss cost of capital is 8 percent.

Determine the net present value of the project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided.Round your final answers to 2 decimal places.)

Net Present Value

$