Evans Company is considering an investment in equipment that is capable of producing metal bolts in half the time of prior technology. The outlay required is $1,300,000. The equip¬

ment is expected to last 5 years and will have no salvage value. The expected after-tax cash flows associated with the project are given below:

Required:
1. Compute the project's payback period.
2. Compute the project's accounting rate of return

(a) on initial investment and

(b) on average investment.
3. Compute the project's net present value, assuming a required rate of return of 10%.
4. Compute the project's internal rate of return.

Transcribed Image Text:

Year Cash Revenues Cash Expenses 12345 $1,690,000 1,690,000 $1,300,000 1,300,000 1,690,000 1,300,000 1,690,000 1,300,000 1,690,000 1,300,000