Hull Inc. is considering the acquisition of equipment that costs $200,000 and has a useful life of

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Hull Inc. is considering the acquisition of equipment that costs $200,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are:

Incremental net cash flows

Year1...............$77,000

Year2.......................67,000

Year3.......................51,000

Year4.......................64,000

Year5.......................50,000

Year6.......................68,000

a. The payback period of this investment is closest

b. If the discount rate is 10%, the net present value of the investment is closest


Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...
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