San Lucas Corporation is considering investment in robotic machinery based upon the following estimates: Cost of robotic
Question:
San Lucas Corporation is considering investment in robotic machinery based upon the following estimates:
Cost of robotic machinery $4,000,000
Residual value 300,000
Useful life 10 years
a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of $700,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter.
b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of $500,000, $700,000, and $900,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer.
c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar.
d. Interpret the results of parts (a), (b), and (c).
Exhibit 2:
Exhibit 5:
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Forensic And Investigative Accounting
ISBN: 9780808056300
10th Edition
Authors: G. Stevenson Smith D. Larry Crumbley, Edmund D. Fenton