Question [Fact Pattem #16] A proposed investment is not expected to have any salvage value'at the end of its 5-year life. For present valué purposes, cash flows are assumed to occur at the end of each...

Compute for the following:

1. Accounting rate or return based on the average investment

2. Net Present Value

3. Traditional Payback Period

Extracted text: Question [Fact Pattem #16] A proposed investment is not expected to have any salvage value'at the end of its 5-year life. For present valué purposes, cash flows are assumed to occur at the end of each year. The company uses a 12% after-tax target rate of return. Purchase Cost Annual Net After- Annual Year and Book Value Tax Cash Flows Net Income $ 0 240,000 $ 0 70,000 78,000 86,000 94,000 $500,000 336,000 1 216,000 192,000 168,000 144,000 Discount Factors for a 12% Rate of Return Present Value of $1 at Present Value of an Annuity of Year the End of Each Period $1 at the End of Each 2 200,000 100,000 36,000 4 102,000 Period 89 80 89 1.69 2 71 .64 2.40 3.04 4 .57 3.61 6 51 4.12 1N34 56